Generic efficiency and collusion-proofness in exchange economies

Gaël Giraud and Céline Rochon

Social Choice and Welfare, 2003, vol. 20, issue 3, 405-428

Abstract: The purpose of this paper is to study the kind of efficient allocations that can be achieved in exchange economies with asymmetric information, by means of a decentralized mechanism robust to coalitional, strategic deviations. To this end, we define a new strategic equilibrium concept – called strong collusion-proof contract – designed to characterize stable communication agreements in games with differential information against non-binding, self-enforcing and incentive compatible deviations by coalitions. We then construct a strategic market mechanism which, for quasi-linear economies, is such that its strong collusion-proof contracts generically induce the incentive compatible interim efficient allocations. Moreover, we show that these allocations can be achieved by strong collusion-proof contracts. We show that the internally consistent extension of the strong collusion-proof contracts generically yields the same set of efficient allocations. Copyright Springer-Verlag Berlin Heidelberg 2003

Date: 2003
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Working Paper: Generic efficiency and collusion-proofness in exchange economies (2003)
Working Paper: Generic efficiency and collusion-proofness in exchange economies (2001)
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DOI: 10.1007/s003550200189

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