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On the Generic Nonoptimality of Dominant-Strategy Allocation Mechanisms: A General Theorem That Includes Pure Exchange Economies

Leonid Hurwicz and Mark Walker
Econometrica
Vol. 58, No. 3 (May, 1990), pp. 683-704
Published by: The Econometric Society
DOI: 10.2307/2938196
Stable URL: http://www.jstor.org/stable/2938196
Page Count: 22
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
On the Generic Nonoptimality of Dominant-Strategy Allocation Mechanisms: A General Theorem That Includes Pure Exchange Economies
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Abstract

It is shown that if an economy's participants cannot be separated into groups across which there are no potentially conflicting interests--i.e., if the economy is "indecomposable"--then every continuous truth-dominant allocation mechanism will attain nonoptimal allocations on an open dense set of preference profiles. Classical "Edgeworth-box" exchange economies (economies with no externalities and no production, but with arbitrary numbers of consumers and goods), as well as economies with public goods and economies with other kinds of externalities, are all shown via simple arguments to be indecomposable. The results are extended to cover nonrevelation mechanisms that have dominant-strategy equilibria.

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