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Economic Environments for which there are Pareto Satisfactory Mechanisms

Kenneth Mount and Stanley Reiter
Econometrica
Vol. 45, No. 4 (May, 1977), pp. 821-842
Published by: Econometric Society
DOI: 10.2307/1912674
Stable URL: http://www.jstor.org/stable/1912674
Page Count: 22
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Economic Environments for which there are Pareto Satisfactory Mechanisms
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Abstract

In recent studies of economic organization [9 and 15] it has been found necessary to impose certain restrictions (regularity conditions) on the communication process. Such restrictions limit the class of environments for which the organization is Pareto satisfactory. We show that a class of environments admits a Pareto satisfactory (and regular) resource allocation mechanism if and only if the graph of the Pareto correspondence is a union of continuous functions. We also study the shape of the Pareto set for a given environment and the way that set varies as the environment varies. We present examples showing that near any environment whose Pareto utility frontier is homeomorphic to a simplex there is whose Pareto frontier is badly chopped up. We also give an example of a class of environments for which the Pareto correspondence has no continuous selection through a given point.

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