Tian, Guoqiang
(2004):
*On the Informational Requirements of Decentralized Pareto-Satisfactory Mechanisms in Economies with Increasing Returns.*

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## Abstract

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 |
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Original Title: | On the Informational Requirements of Decentralized Pareto-Satisfactory Mechanisms in Economies with Increasing Returns |

Language: | English |

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 ; Unawareness D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis |

Item ID: | 41226 |

Depositing User: | Guoqiang Tian |

Date Deposited: | 12 Sep 2012 12:53 |

Last Modified: | 26 Sep 2019 11:22 |

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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/41226 |