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Two-sided allocation problems, decomposability, and the impossibility of efficient trade

David Delacretaz, Simon Loertscher, Leslie Marx and Tom Wilkening

Journal of Economic Theory, 2019, vol. 179, issue C, 416-454

Abstract: Previous literature has shown that private information is a transaction cost that prevents efficient reallocation in two-sided setups with bilateral trade or homogeneous goods. We derive conditions under which the impossibility of efficient trade extends to rich environments in which buyers and sellers have multi-dimensional private types, accommodating many-to-many trades and heterogeneous objects. If agents can be decomposed into unit constituents, the allocation problem can be represented as an assignment game and impossibility obtains through a generalization of Shapley's (1962) result that buyers and sellers are complements. We introduce a general family of payoff functions that ensures decomposability and thus impossibility.

Keywords: Mechanism design; Assignment games; Impossibility theorems; Decomposability; Size-dependent discounts (search for similar items in EconPapers)
JEL-codes: C72 D44 D61 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:179:y:2019:i:c:p:416-454

DOI: 10.1016/j.jet.2018.11.004

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