Journal article
Perfect competition in asymmetric information economies: compatibility of efficiency and incentives
Journal of economic theory, Vol.134(1), pp.175-194
05/01/2007
DOI: 10.1016/j.jet.2006.03.001
Abstract
The idea of perfect competition for an economy with asymmetric information is formalized via an idiosyncratic signal process in which the private signals of almost every individual agent can influence only a negligible group of agents, and the individual agents’ relevant signals are essentially pairwise independent conditioned on the true states of nature. Thus, there is no incentive for an individual agent to manipulate her private information. The existence of incentive compatible, ex post Walrasian allocations is shown for such a perfectly competitive asymmetric information economy with or without “common values”. Consequently, the conflict between incentive compatibility and Pareto efficiency is resolved exactly, and its asymptotic version is derived for a sequence of large, but finite private information economies.
Details
- Title: Subtitle
- Perfect competition in asymmetric information economies: compatibility of efficiency and incentives
- Creators
- Yeneng Sun - National University of SingaporeNicholas C. Yannelis - University of Illinois Urbana-Champaign
- Resource Type
- Journal article
- Publication Details
- Journal of economic theory, Vol.134(1), pp.175-194
- Publisher
- Elsevier Inc
- DOI
- 10.1016/j.jet.2006.03.001
- ISSN
- 0022-0531
- eISSN
- 1095-7235
- Language
- English
- Date published
- 05/01/2007
- Academic Unit
- Economics
- Record Identifier
- 9984380548502771
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