Switching from Complete to Incomplete Information

28 Pages Posted: 29 Jul 2004

Date Written: November 2003

Abstract

We construct an elementary mechanism (Dutta-Sen-Vohra, 1995) that Nash implements the Constrained Walrasian correspondence. We extend it to incomplete and non-exclusive information economies by enlarging the message space of agents. We characterize the set of Bayesian equilibrium outcomes of the mechanism, and thus characterize an extension of the Constrained Walrasian correspondence when one switches from complete to incomplete information. First, measurability restrictions on allocations do not emerge from the strategic behavior of agents: there exist simple economies for which the set of Constrained Rational Expectations equilibrium allocations is not contained in the set of equilibrium outcomes of the mechanism. Next, by imposing measurability restrictions on allocations, the mechanism globally implements the Constrained Rational Expectations Equilibrium correspondence. This result shows game-theoretic connections between these two market equilibrium concepts. However, it is obtained at the price of strong restrictions on the behavior of agents.

Keywords: Implementation, elementary mechanism, Walrasian equilibrium, Rational Expectations Equilibrium

Suggested Citation

Bochet, Olivier, Switching from Complete to Incomplete Information (November 2003). Available at SSRN: https://ssrn.com/abstract=570046 or http://dx.doi.org/10.2139/ssrn.570046

Olivier Bochet (Contact Author)

New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

HOME PAGE: http://https://sites.google.com/site/obochet2/

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