Generic efficiency and collusion-proofness in exchange economies

The purpose of this paper is to study the kind of efficient allocations that can be achieved in exchange economies with asymmetric information, by means of a decentralized mechanism robust to coalitional, strategic deviations. To this end, we define a new strategic equilibrium concept – called strong collusion-proof contract – designed to characterize stable communication agreements in games with differential information against non-binding, self-enforcing and incentive compatible deviations by coalitions. We then construct a strategic market mechanism which, for quasi-linear economies, is such that its strong collusion-proof contracts generically induce the incentive compatible interim efficient allocations. Moreover, we show that these allocations can be achieved by strong collusion-proof contracts. We show that the internally consistent extension of the strong collusion-proof contracts generically yields the same set of efficient allocations. Received: 22 January 2001/Accepted: 15 April 2002 RID="*" ID="*"  This author was working at CORE when this paper was written. We wish to thank Claude d'Aspremont, David Martimort, Jean-Fran?ois Mertens and Heracles Polemarchakis for helpful comments on an earlier version. The usual disclaimer applies.