Stability and Universal Implementability of the Price Mechanism

Kohzo Shiraishi (kporco@eb.kobegakuin.ac.jp), Ken Urai (urai@econ.osaka-u.ac.jp) and Hiromi Murakami (murakami@math.econ.osaka-u.ac.jp)
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Kohzo Shiraishi: Faculty of Economics, Kobegakuin University
Ken Urai: Graduate School of Economics, Osaka University
Hiromi Murakami: School of Business Administration, Kwansei Gakuin University

No 18-16, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: An axiomatic characterization of price or market mechanisms is one of the most important problems in general equilibrium theory. Based on the general equilibrium framework and the characterization of the price mechanism, this paper provides a new perspective or a uni ed viewpoint on some axioms in social choice theory and a setting for the informational efficiency problem of the allocation mechanisms. Our arguments focus on a contemporary reconsideration and generalization of the category theoretic method in Sonnenschein (1974) and the replica stability arguments in social choice theory like Thom- son (1988) and Nagahisa (1994). Sonnenschein's axiomatic characterization of the price mechanism is extended to an economy-dependent welfare form of a universal implementability theorem. The frame- work provides new methods and general settings in treating mechanisms with messages or information, and many social choice axioms. Our result also has an important economic interpretation that the price mechanism can be characterized as a universal rule that is stable in assuring sufficiently high utility levels for each member of a small economy relative to its large expansions.

Keywords: Price Mechanism; Axiomatic Characterization; Category Theory; Informational Effi- ciency; Universal Implementability; Message Mechanism (search for similar items in EconPapers)
JEL-codes: C60 D50 D71 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2018-05
New Economics Papers: this item is included in nep-des and nep-mic
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