Efficient Allocations in Economies with Asymmetric Information When the Realized Frequency of Types Is Common Knowledge

22 Pages Posted: 24 Jul 2013 Last revised: 6 Jan 2016

See all articles by Aristotelis Boukouras

Aristotelis Boukouras

University of Leicester

Kostas Koufopoulos

University of Warwick - Finance Group

Date Written: August 13, 2015

Abstract

We consider a general economy, where agents have private information about their types. Types can be multi-dimensional and potentially interdependent. We show that, if the realized frequency of types (the exact number of agents for each type) is common knowledge, then a mechanism exists, which is consistent with truthful revelation of private information and which implements first-best allocations of resources as the unique equilibrium. The result requires weak restrictions on preferences (Local Non-Common Indifference Property) and on the Pareto correspondence (Anonymity) and it is robust to small noise regarding the realized frequency.

Keywords: adverse selection, first-best, full implementation, mechanism design, single-crossing property

JEL Classification: D71, D82, D86

Suggested Citation

Boukouras, Aristotelis and Koufopoulos, Kostas, Efficient Allocations in Economies with Asymmetric Information When the Realized Frequency of Types Is Common Knowledge (August 13, 2015). Available at SSRN: https://ssrn.com/abstract=2297446 or http://dx.doi.org/10.2139/ssrn.2297446

Aristotelis Boukouras (Contact Author)

University of Leicester ( email )

University Road
Leicester, LE1 7RH
United Kingdom

Kostas Koufopoulos

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

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