Informational Size and Incentive Compatibility

38 Pages Posted: 2 May 2001

See all articles by Richard P. McLean

Richard P. McLean

Rutgers University - Department of Economics

Andrew Postlewaite

University of Pennsylvania - Department of Economics

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

McLean, Richard P. and Postlewaite, Andrew, Informational Size and Incentive Compatibility (April 11, 2001). Available at SSRN: https://ssrn.com/abstract=267768 or http://dx.doi.org/10.2139/ssrn.267768

Richard P. McLean

Rutgers University - Department of Economics ( email )

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Andrew Postlewaite (Contact Author)

University of Pennsylvania - Department of Economics ( email )

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