Informational Size and Incentive Compatibility
38 Pages Posted: 2 May 2001
Date Written: April 11, 2001
Abstract
We examine a general equilibrium model with asymetrically 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 sufficiently small informationally.
Keywords: Asymmetric Information, Incentive Compatibility, Informational Size
JEL Classification: D51, D60, D82
Suggested Citation: Suggested Citation
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