Informational Size and Incentive Compatibility |
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Authors: | Richard McLean Andrew Postlewaite |
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Abstract: | We examine a general equilibrium model with asymmetrically informed agents. The presence of asymmetric information generally presents a conflict between incentive compatibility and Pareto efficiency. We present a notion of informational size and show that the conflict between incentive compatibility and efficiency can be made arbitrarily small if agents are of sufficiently small informational size. |
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Keywords: | incentive compatibility mechanism design incomplete information |
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