Designing efficient and incentive compatible mechanisms is almost impossible in quasi-linear environments

Jianxin Yi, Hefei Wang and Yong Li

Economics Letters, 2018, vol. 173, issue C, 113-117

Abstract: In quasi-linear environments, classic theories state that it is possible to design efficient and incentive-compatible mechanisms, such as Vickrey, Clarke and Groves (VCG) mechanisms. However, once financial constraints are taken into account, we find that almost no financial constraint is compatible with efficiency and individual incentives over unrestricted domains and some restricted domains. Therefore, our results imply that even in quasi-linear environments, it is still impossible to design an efficient and incentive compatible mechanism because of financial constraints.

Keywords: Incentive compatibility; Efficiency; Financial constraints; Mechanism design; Impossibility (search for similar items in EconPapers)
JEL-codes: C79 D71 D82 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:173:y:2018:i:c:p:113-117

DOI: 10.1016/j.econlet.2018.09.018

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