Appropriation and Efficiency: A Revision of the First Theorem of Welfare Economics

Louis Makowski and Joseph Ostroy

American Economic Review, 1995, vol. 85, issue 4, 808-27

Abstract: The first theorem of welfare economics rests on the assumption that individuals have neither price-making nor market-making capacities. The authors offer a revision in which individuals have such capacities. The revision emphasizes two keys for market efficiency: the need to align private rewards with social contributions--called full appropriation--and the need for an assumption to counter the possibility of coordination failures in the choice of produced commodities--called noncomplementarity. The authors also emphasize that information about prices of unmarketed commodities involves decentralized knowledge available only to product innovators and that pecuniary externalities are important potential sources of market failure. Copyright 1995 by American Economic Association.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (59)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819950 ... O%3B2-U&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: Appropriation and Efficiency: A Revision of the First Theorem of Welfare Economics (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:85:y:1995:i:4:p:808-27

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().