Advertisement

Resource Allocation Mechanisms

  • Luis C. Corchón
Chapter
  • 38 Downloads

Abstract

In the previous chapter we presented some concepts of equilibrium which had a certain appeal from the normative point of view. However they were not totally satisfactory as a positive description of how an economy works for two reasons. Firstly, we needed an auctioneer to announce the price schedule. Unless this auctioneer was perfectly informed (which is in some sense self-defeating) we need to assume that people behave truthfully. Secondly, we only considered market mechanisms. While the first reason points out a possible inconsistency of the model, the second refers to a wider question: since Plato, various authors have imagined alternative societies to the one based on the market that were reputed to be optimal from the point of view of some ethical criterion (the name utopia echoes the title of the famous book by Sir Thomas More). In general, the advocates of such societies were not excessively worried about the human behavior being selfish and maximizing (in tune with Hobbes’s sentence ‘man is a wolf for man’) and consequently they did not deal with the problem of the agents having incentives to follow the rules of such societies. The adjective ‘utopic’ therefore came to have a pejorative connotation, indicating that such forms of social organization were destined to fail, at least as long as men behaved in accordance with the assumptions of the ‘homo economicus’.

Keywords

Nash Equilibrium Social Choice Optimal Decision Social Choice Function Equilibrium Concept 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. General introductions to the problem of incentives are to be round in: P. Hammond, ‘Theoretical Progress in Public Economics: A Provocative Assessment’, Oxford Economic Papers 1990, vol. 42Google Scholar
  2. W. Thomson, ‘Concepts of Implementation’, Mimeo, University of Rochester, 1994.Google Scholar
  3. Useful general references on resources allocation mechanisms are: W. Thomson (1986), Manipulation and Implementation in Economics. University of RochesterGoogle Scholar
  4. T. Groves and J.O. Ledyard (1987), ‘Incentive Compatibility since 1972’, in T. Groves, R. Radner and S. Reiter (eds). Information, Incentives and Economic Mechanisms (University of Minnesota Press), sections 1 and 2Google Scholar
  5. J.J. Laffont (1988). Fundamentals of Public Economics (MIT Press), chapter 5Google Scholar
  6. J. Moore, (1992) ‘Implementation, Contracts and Renegotiation in Environments with Complete Information’ in J.J. Laffont (ed.), Advances in Economic Theory, vol. I, VI World Congress of the Econometric Society (Cambridge University Press)Google Scholar
  7. T. Palfrey (1992), ‘Implementation in Bayesian Equilibrium: the Multiple Equilibrium Problem in Mechanism Design’ in J.J. Laffont (ed.), Advances in Economic Theory.Google Scholar
  8. A discussion on the fundamental concepts of game theory can be found in: R.J. Aumann, ‘What is Game Theory Trying to Accomplish?’ in K. Arrow and S. Honkapohya (eds) (1985), Advances in Economic Theory (Oxford University Press); and in E. van Damme, Stability and Perfection of Nash Equilibria (New York, Berlin: Springer).Google Scholar
  9. While a lucid discussion on the role of strong and Nash equilibria in implementation theory can be found in: E. Maskin (1985), ‘The Theory of Implementation in Nash equilibrium: a Survey’ in L. Hurwicz, D. Schmeidler and H. Sonnenschein (eds), Social Goals and Social Organization (Cambridge University Press), pp. 174–5).Google Scholar
  10. The difference of the implementation approach with other game-theoretical approaches is discussed in J. Bergin and J. Duggan (1994), ‘Nou Cooperative Foundations of the Core: An Implementation-Theoretic Approach,’ mimeo, Queen’s Universities, November,Google Scholar

Copyright information

© Luis C. Corchón 1996

Authors and Affiliations

  • Luis C. Corchón
    • 1
  1. 1.Universidad de AlicanteAlicanteSpain

Personalised recommendations