Take Action

Home | Faculty & Research Overview | Research

Research Details

The Efficiency of Competitive Mechanisms under Private Information, Journal of Economic Theory

Abstract

We consider the efficiency properties of exchange economies where privately informed traders behave strategically. Specifically, a competitive mechanism is any mapping of traders' reports about their types to an equilibrium price vector and allocation of the reported economy. In our model, some traders may have non-vanishing impact on prices and allocations regardless of the size of the economy. Although truthful reporting by all traders cannot be achieved, we show that, given any desired level of approximation, there is N such that any Bayesian-Nash equilibrium of any competitive mechanism of any private information economy with N or more traders leads, with high probability, to prices and allocations that are close to a competitive equilibrium of the true economy. In particular, allocations are approximately efficient. A key assumption is that there is small probability that traders behave non-strategically.

Type

Article

Author(s)

Nabil Al-Najjar, Rann Smorodinsky

Date Published

2005

Citations

Al-Najjar, Nabil, and Rann Smorodinsky. 2005. The Efficiency of Competitive Mechanisms under Private Information. Journal of Economic Theory. 137(1): 383-403.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more

Take Action