Tian, Guoqiang (2004): On the Informational Requirements of Decentralized Pareto-Satisfactory Mechanisms in Economies with Increasing Returns.
Download (301kB) | Preview
This paper investigates the dimension requirements of informationally decentralized Pareto-satisfactory processes in production economies with increasing returns to scale or more general types of non-convexities. We show that the marginal cost pricing (MCP) mechanism is informationally effcient over the class of non-convex production economies where MCP equilibrium allocations are Pareto effcient. We then discuss the informational requirements of realizing Pareto effcient allocations for a general class of non-convex production economies. We do so by examining the dimension of the message space of the marginal cost pricing mechanism with transfers. Since the set of marginal cost pricing equilibrium allocations with transfers contains Pareto effcient allocations as a subset for every economy under consideration, Pareto e±cient allocations can be realized through the MCP mechanism with transfers, which is informationally decentralized and has a finite-dimensional message space. This result is sharply contrasted to the impossibility result given in Calsamigla (1977).
|Item Type:||MPRA Paper|
|Original Title:||On the Informational Requirements of Decentralized Pareto-Satisfactory Mechanisms in Economies with Increasing Returns|
|Keywords:||Informational Requirements, Decentralized Pareto-Satisfactory Mechanisms, Increasing Returns|
|Subjects:||D - Microeconomics > D5 - General Equilibrium and Disequilibrium
D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice; Clubs; Committees; Associations
P - Economic Systems > P5 - Comparative Economic Systems > P51 - Comparative Analysis of Economic Systems
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
|Depositing User:||Guoqiang Tian|
|Date Deposited:||12. Sep 2012 12:53|
|Last Modified:||13. Feb 2013 06:22|
1. Bonnisseau, J. M. (1988). "On Two Existence Results in Economies with Increasing Returns," Jouranl of Mathematical Economics 17, 193-207.
2. Bonnisseau, J. M. B. Cornet (1988). "Existence of Equilibria when Firms Follow Bounded Losses Pricing Rules," Journal of Mathematical Economics 17, 119-147.
3. Brown, D. J. (1990), "Equilibrium Analysis with Nno-Convex Technologies, In: "Hand- book of Mathematical Economics," Vol. IV (W. Hildenbrand and H. Sonnenschein, Eds), Elsevier Science Publisher, 1964-1995.
4. Brown D. J. and G. M. Heal (1983). "Marginal vs. Average Cost Pricing in the Presence of a Public Monopoly," American Economic Review 73, 189-193.
5. Brown D. J. and G. M. Heal (1985). "The Optimality of Regulated Pricing: A General Equilibrium Analysis." Lecture Notes in Economics and Mathematical Systems, Vol. 244, Advances in Equilibrium Theory, Springer-Verlag, June 1985.
6. Brown D. J., G. M. Heal, and R. Starr (1992). "Two-Part Marginal Cost Pricing Equilibria: Existence and E±ciency," Journal of Economic Theory 57, 52-72.
7. Calsamiglia X (1977) Decentralized resource allocation and increasing returns. Journal of Economic Theory 14: 263-283.
8. Calsamiglia X, Kirman A (1993) A unique informationally e±cient and decentralized mechanism with fair outcomes. Econometrica 61: 1146-1172.
9. Cornet, B. (1988). "General Equilibrium Theory and Increasing Returns," Journal of Mathematical Economics 17, 103-118.
10. Cornet, B. (1989). "Existence of Equilibria in Economies with Increasing Returns," in Contributions to Operations Research: The Twentieth Anniversary of CORE (B. Cornet and H. Tulkens), The MIT Press.
11. Cornet, B. (1990). \Marginal Cost Pricing and Pareto Optimality," in Essays in Honor of Edmond Malinvaud, Vol. 1, MIT Press, Cambridge, MA, 13-52.
12. Greenberg M (1967) Lectures on algebraic topology, Benjamin, New York.
13. Hayek F A. von (1935) The present state of the debate, in: Collectivist economic planning, ed. by F. A. von Hayek, London, 1935.
14. Hayek F. A. von (1945) The use of knowledge in society. American Economic Review 35:519-530.
15. Hurwicz L (1960) Optimality and informational e±ciency in resource allocation processes in: Mathematical Methods in the Social Sciences, ed. by K. J. Arrow, S. Karlin, and P. Suppes, Stanford University Press. Hurwicz L (1972) On informationally decentralized systems, in: R. Radner and C. B. McGuire, eds., Decision and Organization in Honor of J. Marschak (North Holland) 297-336.
16. Hurwicz L (1973) The design of mechanisms for resource allocation. American Economic Review 63: 1-30.
17. Hurwicz L (1979) On the dimension requirements of informationally decentralized Pareto- satisfactory processes in: Studies in Resource Allocation Processes, ed. by K. Arrow and L, Hurwicz. Cambridge University Press.
18. Hurwicz L (1979) On allocations attainable through Nash equilibria. Journal of Economic Theory 21: 149-165.
19. Hurwicz L (1986) On informational decentralization and e±ciency in resource allocation mechanism in: Studies in Mathematical Economics, ed. by S. Reiter Mathematical Association of America.
20. Hurwicz L (1999) Revisiting externalities. Journal of Public Economic Theory 1: 225-246.
21. Ishikida T, Marschak T (1996) Mechanisms that e±ciently verify the optimality of a proposed action. Economic Design 2: 33-68.
22. Jordan, J S (1982) The competitive allocation process is informationally e±cient uniquely. Journal of Economic Theory 28: 1-18.
23. Jordan, J. S. (1987) The Informational requirements of local stability in decentralized allo- cation mechanisms. in T. Groves, R. Radner, and S. Reiter, eds., Information, Incentives and Economic Mechanisms (Minneapolis: University of Minnesota).
24. Kelley J L (1955) General Topology. Van Nostrand, Princeton, N.J.
25. Lange O (1936-1937) On the economic theory of socialism. Review of Economic Studies
26. Lange O (19942) The foundations of welfare economics Econometrica 10: 215-228.
27. Lerner A P (1944) The Economics of Control, New York.
28. Marschak T, Reichelstein S (1995) Communication requirements for individual agents in networks and hierarchies, in: The Economics of Informational Decentralization: Complex- ity, E±ciency, and Stability, ed. by J. O. Ledyard, (Essays in Honor of Stanley Reiter) Kluwer Academic Publishers: 311-346.
29. Maskin, E (1999) Nash equilibrium and welfare optimality. Review of Economic Studies 66: 23-38.
30. Michael E (1956) Continuous selections I. Annals of Mathematics 63: 361-382.
31. Mount K. R. (1995) Mechanisms for the realization of equilibria, in: The Economics of Informational Decentralization: Complexity, Effciency, and Stability, ed. by J. O. Ledyard, (Essays in Honor of Stanley Reiter) Kluwer Academic Publishers: 35-52.
32. Mount K R, Reiter S (1974) Informational size of message spaces. Journal of Economic Theory 8: 161-191.
33. Nayak J (1982) The informational e±ciency of the Walras process in economies with production, Research Paper No. 21, Cambridge University.
34. Osana H (1978) On the informational size of message spaces for resource allocation process Journal of Economic Theory 17: 66-78.
35. Quinzii, M. Increasing Returns and E±ciency, Oxford University Press, New York, 1992.
36. Reichelstein S, Reiter S (1988) Game forms with minimal strategy spaces. Econometrica 49: 661-692.
37. Saijo T (1988) Strategy space reduction in Maskin's theorem: su±cient conditions for Nash implementation. Econometrica 56: 693-700.
38. Williams S R (1986) Realization and Nash implementation: two aspects of mechanism design. Econometrica 54: 139-151.
39. Sato F (1981) On the informational size of message spaces for resource allocation processes in economies with public goods. Journal of Economic Theory 24: 48-69.
40. Tian G (1990) Completely feasible and continuous Nash-implementation of the Lindahl correspondence with a message space of minimal dimension. Journal of Economic Theory 51: 443-452.
41. Tian G (1994) On informational e±ciency and incentive aspects of generalized ratio equilibria. Journal of Mathematical Economics 23: 323-337.
42. Tian G (2003), "A Unique Informationally E±cient Allocation Mechanism in Economies with Public Goods," 2003, mimeo.
43. Tian G (2004), "A Unique Informationally E±cient Allocation Mechanism in Economies with Consumption Externalities," International Economic Review, 45, 79-111.
44. Tian G (2005), "Implementation of Marginal Cost Pricing Equilibrium Allocations with Transfers in Economies with Increasing Returns to Scale," mimeo.
45. Tian G (2006), "The Unique Informational E±ciency of the Competitive Mechanism In Economies with Production," Social Choice and Welfare, 26 (2006), 155-182.
46. Varian H R (1992) Microeconomic Analysis, third edition, Norton & Company, New York.
47. Vohra, R. (1988). "On the Existence of Equilibria in Economies with Increasing Returns," Journal of Mathematical Economics 17, 179-192.
48. Walker M (1977) On the informational size of message spaces Journal of Economic Theory 15: 366-375.