Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.jet.2006.03.001
Title: Perfect competition in asymmetric information economies: compatibility of efficiency and incentives
Authors: Sun, Y. 
Yannelis, N.C.
Keywords: Asymmetric information
Incentive compatibility
Negligible private information
Pareto efficiency
Perfect competition
Walrasian allocation
Issue Date: 2007
Source: Sun, Y.,Yannelis, N.C. (2007). Perfect competition in asymmetric information economies: compatibility of efficiency and incentives. Journal of Economic Theory 134 (1) : 175-194. ScholarBank@NUS Repository. https://doi.org/10.1016/j.jet.2006.03.001
Abstract: The idea of perfect competition for an economy with asymmetric information is formalized via an idiosyncratic signal process in which the private signals of almost every individual agent can influence only a negligible group of agents, and the individual agents' relevant signals are essentially pairwise independent conditioned on the true states of nature. Thus, there is no incentive for an individual agent to manipulate her private information. The existence of incentive compatible, ex post Walrasian allocations is shown for such a perfectly competitive asymmetric information economy with or without "common values". Consequently, the conflict between incentive compatibility and Pareto efficiency is resolved exactly, and its asymptotic version is derived for a sequence of large, but finite private information economies.©2006 Elsevier Inc. All rights reserved.
Source Title: Journal of Economic Theory
URI: http://scholarbank.nus.edu.sg/handle/10635/19962
ISSN: 00220531
10957235
DOI: 10.1016/j.jet.2006.03.001
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