simple strategy proof approximately walrasian mechanisms abstract this note provides an indirect analysis of the incentive properties of the walrasian mechanism it presents mechanisms under which truth telling is a dominant strategy in finite exchange economies in contrast to the walrasian mechanism and whose outcomes generically approximate walrasian ones for large economies these mechanisms provide new insights on the well know trade off between efficiency and incentive compatibility in finite economies journal of economic literature classification numbers d50 d71 d78

strategy proof exchange we consider the allocation of goods in exchange economies with a finite number of agents who may have private information about their preferences in such a setting standard allocation rules such as walrasian equilibria or rational expectations equilibria are not compatible with individual incentives we characterize the set of allocation rules which are incentive compatible or in other words the set of strategy proof social choice functions social choice functions which are strategy proof are those which can be obtained from trading according to a finite number of pre specified proportions the number of proportions which can be accommodated is proportional to the number of agents such rules are necessarily inefficient even in the limit as the economy grows

electricity tariff reforms welfare impacts and energy poverty implications abstract like other energy exporting countries brunei darussalam has pursued an energy pricing policy that sets energy prices below market rates the country introduced tariff reforms replacing the declining block tariff dbt scheme by an increasing block tariff ibt structure in 2012 the reform however was a rate structure change and not a subsidy removal and electricity tariffs in the country remained lower than the long run marginal cost the study investigated a subsidy removal scenario setting the tariff rate at the short run marginal cost which is around 200 higher than the current average tariff rate the results show that with ibt welfare losses and the increase in electricity expenditures would be high for non poor households for those living in urban areas and for those engaged in white collar jobs and it would have been the reverse had the government not introduced tariff rate structure reforms under price elasticity scenarios welfare losses would be high under inelastic than elastic demand case for both ibt and dbt cases electricity expenditures however would remain below 5 level far lower than the energy poverty threshold level of 10 of household income the tariff structure reform therefore shielded the lowest income households from potential impacts of subsidy removal

is there a principle for defining industries this paper presents a criterion for dividing observable firms into industries the previous literature has failed to recognize how important is the lack of a principle for forming industries not only does the lack of an industry criterion lead to bad antitrust decisions but it brings into question the logic behind applying standard economic analyses to observable groups of sellers economic theory traditionally has constructed models of markets composed of sellers of a homogeneous commodity in the application of theories to observable sellers whose production processes and products are rarely precisely identical the easy and convenient assumption that all sellers are identical is violated one of the lacks of the theoretical literature is that it has given no guidance on how to put existing producers together to form the markets and industries to which economic modellers make reference instead applied economists have tended to follow the pragmatic advice that violations of assumptions do not matter so long as the firms behave approximately as if the assumptions of the model were satisfied 8 logic requires however that this as if methodology be applied only to firms which have been selected independently of the model being used for example to find the bounds of a competitive industry by finding the group of firms whose behavior is predicted by the competitive model and then to justify the use of the model on the grounds that the model predicts well is tautological the logic of analyzing industry behavior in contradiction to the assumptions of the model is defensible only if there exists a procedure for forming an industry that is independent of the criterion used to select the model to analyze it this paper provides such a procedure the industry bounding procedure outlined in this paper may be one of many and others may be found in the future which have more desirable properties than the one presented here the main contribution of this paper is to demonstrate that there is at least one definition which can be used to divide existing firms into industries and that the industry so defined is unique for each firm the lack of a criterion for defining industries is especially noticeable in antitrust analyses where the question posed is whether a particular firm is a monopoly not whether it behaves as if it were one the current procedure in such cases is ad hoc in the true sense of the term every situation is taken as unique and while the economic witness will sometimes apologize about measurement problems a list of industry members is produced for use in court in what stigler has called an impudent exercise in economic gerrymandering 20 8

threshold strategy proofness on manipulability in large voting problems in voting problems where agents have lipschitz continuous utility functions on a multidimensional space of alternatives a voting rule is threshold strategy proof if any agent can obtain only a limited utility gain by not voting for a most preferred alternative if the number of agents is large enough for anonymous voting rules it is shown that this condition is not only implied by but is in fact equivalent to the influence of any single agent decreasing to zero as the number of agents grows if there are at least five agents the mean rule taking the average vote is shown to be the unique anonymous and unanimous voting rule that meets a lower bound with respect to the number of agents needed to obtain threshold strategy proofness

informational smallness and the scope for limiting information rents abstract for an incomplete information model of public good provision with interim participation constraints we show that efficient outcomes can be approximated with approximately full surplus extraction when there are many agents and each agent is informationally small the result holds even if agents payoffs cannot be unambiguously inferred from their beliefs the contrary result of neeman z neeman the relevance of private information in mechanism design j econ theory 117 2004 55 77 rests on an implicit uniformity requirement that is incompatible with the notion that agents are informationally small because there are many other agents who have information about them

approximately competitive equilibria in large finite economies abstract we consider exchange economies where each consumer may report or act according to any demand function provided that there exist situations that the consumer finds plausible in which the reported demand performs at least as well as the true demand we identify conditions under which as the size of the economy increases all the market clearing prices and allocations of the reported economy approximate the competitive equilibria of the true economy journal of economic literature classification numbers d51 d82

on the possibility of informationally efficient markets this paper presents conditions for a resolution of the grossman stiglitz paradox of informationally efficient markets we display a market with asymmetric information where a privately revealing equilibrium obtains in a competitive framework and where incentives to acquire information are preserved as long as the correlation in traders valuations is not too large the equilibrium is efficient and the problems associated with fully revealing rational expectations equilibria are precluded without resorting necessarily to noise traders the robustness of the results to general information structures is established and the effect of market power is examined in a large market approximation to the competitive economy the model is applied to explain changes in bidding behavior in central bank liquidity auctions in the crisis period jel d82 d84 g14 e59

some simple geometry of the welfare loss from competitive monopolies in the standard neoclassical approach to analyzing monopoly monopolies are merely assumed to exist this assumption has never set well with many economists who argue that there should be competition for monopolies just as there is competition within an industry the issue has been considered recently within what has come to be known as rent seeking literature 1 while the rent seeking literature has many dimensions one of its central arguments is that the competition for monopolies increases the welfare loss resulting from them 2 the rent seeking model argues that the welfare loss from monopoly is not only the harberger triangle it also includes an amount related to the monopolist s profit and in the special case of competitive rent seeking the welfare loss from rent seeking equals the entire monopoly profits thus in the special case of competitive rent seeking the total welfare loss from monopoly is given by the shaded trapezoid in figure 1

the divergence of sic industries from antitrust markets abstract a comparison between the size of markets alleged in justice department merger cases and sic industries indicates that sic industries generally are far larger than antitrust markets

on the failure of core convergence in economies with asymmetric information in interim economies with asymmetric information we show that the coarse core of wilson 1978 does not converge to price equilibrium allocations as the economy is replicated this failure of core convergence is a basic consequence of asymmetric information and extends to any reasonable notion of either interim core or price equilibrium

industrial organization paradigms empirical evidence and the economic case for competition policy the recent reform of competition policy in canada prompts one to ask whether there remains a tenable economi c case for antitrust policy to answer this question this paper begi ns by sketching competing industrial organization i o paradigms th e empirical evidence bearing on these paradigms particularly the m ainline structure conduct performance paradigm which has provided the main theoretical support for competition policy is examined it is concluded that recent theoretical and empirical work in i o have undermined the traditional economic case for competition policy the last section of the paper attempts a partial reconstruction of the ca se for competition policy along somewhat unorthodox lines

market power and information revelation in dynamic trading we study a strategic model of dynamic trading where agents are asymmetrically informed over common value sources of uncertainty there is a continuum of buyers and a finite number n of sellers all buyers are uninformed while at least one seller is privately informed about the true state of the world when n 1 full information revelation never occurs in equilibrium and the only information transmission happens in the first period with n 1 the outcome depends both on the structure of the sellers information and even more importantly on the intensity of competition allowed by the existing trading rules when there is intense competition absence of clienteles information is fully and immediately revealed to the buyers in every equilibrium for n large enough regardless of the number of informed sellers on the other hand for trading arrangements characterized by less intense forms of competition presence of clienteles for any n we always have equilibria where information is never fully revealed moreover in that case when only one seller is informed for many parameter configurations there are no equilibria with full information revelation even for large n jel c72 c78 d82 d83

the efficiency of competitive mechanisms under private information we consider the efficiency properties of exchange economies where privately informed traders behave strategically specifically a competitive mechanism is any mapping of traders reports about their types to an equilibrium price vector and allocation of the reported economy in our model some traders may have non vanishing impact on prices and allocations regardless of the size of the economy although truthful reporting by all traders cannot be achieved we show that given any desired level of approximation there is n such that any bayesian nash equilibrium of any competitive mechanism of any private information economy with n or more traders leads with high probability to prices and allocations that are close to a competitive equilibrium of the true economy in particular allocations are approximately efficient a key assumption is that there is small probability that traders behave non strategically

an economic theory of economic analysis the case of the school of salamanca the school of salamanca often is identified as the first economic tradition in the history of the dismal science its members anticipated principles later developed by the likes of adam smith and carl menger this paper provides an economic theory of the production of economic analysis by the doctors of salamanca beginning from the observation that producers of economic analysis respond to incentives the same way producers of meat beer or bread do historically the demand for economic analysis arises from two sources governments and interest groups i argue that the changes in international trade associated with the emergence of new transatlantic markets in the sixteenth century led to an increase in the demand for economic analysis by spanish merchants and that the contribution of the school of salamanca was grounded in the predictable supply response to those fresh incentives

antitrust and competition historically considered although antitrust laws enjoy wide support among economists there was almost no such support during the early years of the sherman act one reason for this transformation is a change in the theory of competition until the 1920s most economists viewed competition as a dynamic rivalrous process that would be stifled by antitrust laws once the perfect competition model which largely ignores rivalry was accepted economists opinions of antitrust grew more favorable to the extent that antitrust interferes with rivalry and enterprise the competitive model has very likely misdirected the profession at least as far as antitrust policy is concerned

search adverse selection and market clearing we examine a dynamic decentralized trading model with infinitesimal sellers and buyers to investigate whether or not the market fails to clear in the limit of search friction vanishing a seller who has private information about product quality and a buyer are matched to bargain over price they form a long term relationship if they reach agreement they return to the matching pool if they fail to agree or the existing relationship is dissolved the market fails to clear if and only if the ratio of agents patience over the dissolution rate exceeds a threshold

monotonicity and rationalizability in a large first price auction this paper proves that the monotonicity of bidding strategies together with the rationality of bidders implies that the winning bid in a first price auction converges to the competitive equilibrium price as the number of bidders increases wilson 1977 instead of analysing the symmetric nash equilibrium we examine rationalizable strategies bernheim 1984 pearce 1984 among the set of monotonic bidding strategies to prove that any monotonic rationalizable bidding strategy must be within a small neighbourhood of the truthful valuation of the object conditioned on the signal received by the bidder we obtain an information aggregation result similar to that of wilson 1977 while dispensing with almost all symmetric assumptions and using a milder solution concept than the nash equilibrium in particular if every bidder is ex ante identical then any rationalizable bidding strategy must be within a small neighbourhood of the symmetric nash equilibrium in a symmetric first price auction the symmetry of outcomes is implied rather than assumed copyright 2005 wiley blackwell

trade with heterogeneous prior beliefs and asymmetric information no trade theorems have shown that new information will not lead to trade when agents share the same prior beliefs this paper explores the structure of no trade theorems with heterogeneous prior beliefs it is shown how different notions of efficiency under asymmetric information ex ante interim ex post are related to agents prior beliefs as well as incentive compatible and public versions of those efficiency concepts these efficiency results are used to characterize necessary and sufficient conditions on agents beliefs for no trade theorems in different trading environments

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

implementation in economies with a continuum of agents we study a general implementation problem for exchange economies with a continuum of players and private information and test the robustness of the results for sequences of approximating finite economies assuming that the designer knows the distribution of the characteristics in the economy we consider continuous and unique implementation in both its equilibrium and dominant strategies versions and obtain results for general self selective first and second best allocations an upper hemicontinuity property of bayesian equilibria of approximating economies for continuous mechanisms is demonstrated using this we can for example conclude that if a given continuous mechanism implements uniquely a walrasian allocation in the continuum economy then all bayesian equilibria of large approximation economies will with probability close to one yield an allocation which is almost ex post pareto optimal

private information in large economies this paper examines the effect of private information in large economies we show that in a model with stochastic information structures the restrictions imposed on allocations by the presence of private information disappear in large economies we also show that for a large class of direct mechanisms the incentive for any agent to falsely report private information goes to zero as the number of agents becomes large these results provide an informational smallness analog to existing quantity smallness limiting results in the literature

asymptotic efficiency in large exchange economies with asymmetric information the authors provide conditions on an exchange economy with asymmetric information that guarantee that when the economy is replicated sufficiently often there will be an allocation that is incentive compatible individually rational and nearly efficient the main theorem covers both the case in which aggregate uncertainty remains when the economy is replicated and the case in which replication eliminates aggregate uncertainty in addition the authors demonstrate how their theorem does or does not apply to standard asymmetric information problems such as the buyer s bid double auction problem akerlof s lemons problem and insurance with asymmetric information copyright 1992 by the econometric society

personal versus market logics of control a historically contingent theory of the risk of acquisition this paper develops and tests a theory of the historical contingency of the risk of acquisition using data from the higher education publishing market from 1958 1990 interviews and historical analyses are combined to identify two forms of capitalism personal and market and in particular to publishing to identify the institutional logics identified with each form of capitalism an editorial and a market logic hazard rate models are used to test for differences in the effects of these two logics on the organization and market determinants of acquisition publishers with relational network forms of organization in production and distribution were at a higher risk of acquisition in the market period but not in the editorial period competition in the product market increased the risk of acquisition in the market period but not the editorial period the covariates explaining the risk of acquisition change as a consequence of the evolution of capitalism and as a result of a firm s strategic and structural conformity with the institutional logic of the prevailing form of capitalism

imperfect competition and efficiency in lemons markets this article studies the impact of competition on the degree of inefficiency in lemons markets more precisely we characterise the second best mechanism i e the optimal mechanism with private information in a stylised lemons market with finite numbers of buyers and sellers we then study the relationship between the degree of efficiency of the second best mechanism and market competitiveness a general message of our results is that increasing competition may not help lemons markets in some circumstances moreover increasing competition beyond a certain degree increases the distance between the first best and second best levels of efficiency

incomplete information incentive compatibility and the core abstract we consider an exchange economy in which agents possess private information at the time of engaging in state contingent contracts while communication of private information is permitted the true information state is not verifiable the enforcement of contracts is therefore limited by incentive compatibility constraints we formalize a notion of the core for such an economy our analysis can be viewed as an attempt to incorporate incentive compatibility in the coarse core of r wilson 1978 econometrica46 807 816 or as an attempt to introduce coalitional contracts in the notion of incentive efficiency of b holmstrom and r myerson 1983 econometrica51 1799 1819 while there are some special cases in which the incentive compatible core is non empty our main result shows that is not generally true journal of economic literatureclassification numbers c71 c72 d51

the economists and the problem of monopoly for much too long a time students of the history of the american antitrust policy have been at least mildly perplexed by the coolness with which american economists greeted the sherman act was not the nineteenth century the period in which the benevolent effects of competition were most widely extolled should not a profession praise a congress which seeks to legislate its textbook assumptions into universal practice and with even modest foresight should not the economists have seen that the sherman act would put more into economists purses than perhaps any other law ever passed of course there were partial explanations the coolness of the economists sometimes rested more on disbelief in the efficacy of the sherman act than on hostility to its purpose the route of regulation was preferred although this preference hardly restores the reputations of those economists as prophets one might even point out that there were not many good american economists at the time although an undeniable giant such as irving fisher shared the common view i intend on this occasion to review the attitudes of economists toward monopoly as a problem in public policy my subject however is a good deal broader than the sherman act and its reception the last two centuries of the economic writings on monopoly policy particularly in england and the united states will be surveyed thereafter i shall examine the reciprocal effects of economics and antitrust policy

implications of applying solar industry best practice resource estimation on project financing abstract solar resource estimation risk is one of the main solar pv project risks that influences lender s decision in providing financing and in determining the cost of capital more recently a number of measures have emerged to mitigate this risk the study focuses on solar industry s best practice energy resource estimation and assesses its financing implications to the 27 mwp solar pv project study in brunei darussalam the best practice in resource estimation uses multiple data sources through the measure correlate predict mcp technique as compared with the standard practice that rely solely on modelled data source the best practice case generates resource data with lower uncertainty and yields superior high confidence energy production estimate than the standard practice case using project financial parameters in brunei darussalam for project financing and adopting the international debt service coverage ratio dscr benchmark rates the best practice case yields dscrs that surpass the target rates while those of standard practice case stay below the reference rates the best practice case could also accommodate higher debt share and have lower levelized cost of electricity lcoe while the standard practice case would require a lower debt share but having a higher lcoe

the limits of antitrust the author argues that the inhospitality tradition in antitrust has serious costs and causes judges to reject economically beneficial business practices he also contends that the main alternative to the inhospitality tradition the rule of reason enunciated by the supreme court does not provide useful guidance to judges in antitrust because it is completely open ended and provides no assistance in determining how to weigh the relevant factors he then proposes his own alternative approach error cost framework to deciding anti trust cases specifically he suggests that judges should mimic the approach taken by economists and deploy a series of presumptions or filters to guide their inquiry the author believes this would make it easier for businesses to plan their affairs and also reduce litigation costs

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

perfect competition in asymmetric information economies compatibility of efficiency and incentives the idea of perfect competition for an economy with asymmetric information is formalized via an idiosyncratic signal process in which the private signals of almost every individual agent can influence only a negligible group of agents and the individual agents relevant signals are essentially pairwise independent conditioned on the true states of nature thus there is no incentive for an individual agent to manipulate her private information the existence of incentive compatible ex post walrasian allocations is shown for such a perfectly competitive asymmetric information economy with or without common values consequently the conflict between incentive compatibility and pareto eciency is resolved exactly and its asymptotic version is derived for a sequence of large but finite private information economies

efficiencies without economists the early years of resale price maintenance resale price maintenance rpm continues to be a contentious topic both in economics and in antitrust during the 1980s economists derived new efficiency motivations for rpm while the supreme court reaffirmed the decades old per se ban on its use and congress threatened to extend that ban in the 1990s after several years of federal inactivity during the reagan administration the federal trade commission ftc has once again begun bringing rpm cases while economists have proposed a number of different efficiency explanations for rpm such theorizing has been performed largely without the help of businesses that actually use rpm with little practical evidence such hypotheses have been subject to substantial criticism of course since rpm has been per se illegal businesses may be reluctant to admit that they are engaged in the practice which would appear to be a necessary condition for generating an efficiency defense this article seeks to find out why businesses may believe that they benefit from rpm it does so by examining which efficiency rationales were advanced by firms during a critical time for rpm in the united states 1915 to 1917 these rationales drawn largely from previously unexplored materials are then examined in the light of current economic theory there are two basic sources for these rationales the first is three hearings on rpm held in 1915 1916 and 1917 in the u s house of representatives on a bill to legalize certain forms of rpm the second is the transcript of seven days of hearings the ftc held in 1917 to discuss efficiency motivations for rpm section ii explains several economic theories that have been posited for rpm and briefly discusses the critiques of these theories that have arisen in the legal and economic communities section iii examines federal rpm case law prior to 1918 and posits efficiency rationales from section ii to match the products involved in the case law section iii also discusses the uncertainty in the case law during the period 1908 to 1917 and the concepts behind the various judicial decisions section iv presents the efficiency arguments made during this period of legal uncertainty

equilibria and incentives in private information economies abstract this paper considers three solution concepts in a large private information economy namely walrasian expectations equilibrium private core and insurance equilibrium it shows that these three concepts coincide with each other when the agents are informationally negligible in such an economy in contrast to the finite agent setting one can construct a large private information economy in which incentive compatibility fails completely in the sense that almost every agent in any walrasian expectations equilibrium private core insurance equilibrium allocation has the incentive to misreport her type

quantifying the impact of r d on pv project financing costs abstract energy technology research and development r d typically focuses on advancing the performance and reducing equipment and installation costs however such r d can also have significant indirect impacts on other factors incorporating the impact that r d activities have on financing costs can provide a more complete picture of the consequences of these decisions and may allow policymakers to make better decisions in this paper we discuss some historical examples of r d impacting financing costs in the solar energy sector summarize the areas of r d that can impact financing and describe methodological approaches that can be used to quantify the impact of r d on financing costs and as a result the levelized cost of energy lcoe we estimate that r d driven reductions in financing costs in the solar sector from current levels to low risk levels could reduce lcoe approximately 25 alternatively without the r d advances needed to prevent future risks and complications financing costs in the solar sector could increase by as much as 115

antitrust in the reagan administration a report from the belly of the beast abstract this paper is a report on selected aspects of antitrust policy in the reagan administration it was written while the author was director of the bureau of economics at the federal trade commission the topics covered include merger guidelines the general drift of antitrust policy deregulatory initiatives consumer protection policy and the stronger emphasis on economic analysis in the conduct of antitrust policy the conclusions drawn are not very sanguine in a normative sense perhaps our solace lies in the positive study of why the antitrust bureaucracies behave as they do

informational size and incentive compatibility with aggregate uncertainty in mclean and postlewaite econometrica 56 1992 p 2421 we analyzed pure exchange economies with asymmetrically informed agents we defined a notion of informational size and showed that when the aggregate information of all agents resolves nearly all the uncertainty regarding the state of nature the conflict between incentive compatibility and ex post efficiency can be made small if agents have sufficiently small informational size this paper investigates the relationship between informational size and efficiency for the case in which nontrivial aggregate uncertainty is present i e when significant uncertainty about the world persists even when the information of all agents is known

information aggregation in a large multi stage market game abstract a three stage market game mechanism is devised that is simple actions are quantities and outcomes are determined by arithmetic operations that do not depend on details of the economy and achieves efficiency in a two divisible good pure exchange setting with potential information aggregation after an entry stage agents make offers which are provisional for all but a small randomly selected group then those offers are announced and everyone else makes new offers with payoffs determined by a shapley shubik market game for a finite and large number of players there exists an almost ex post efficient equilibrium conditions for uniqueness are also provided

core convergence with asymmetric information we analyze the ex ante incentive compatible core for replicated private information economies we show that any allocation in the core when the economy is replicated sufficiently often is approximately walrasian for the associated arrow debreu economy

atomistic and systemic approaches to research on new technology based firms a literature study the dominating view of new technology based firms is that these firms are driven by a heroic entrepreneur who pursues aggressive growth new technology based firms are expected to sooner or later develop tangible products with which new market niches are created and existing ones penetrated often the only perceived economic impact of new technology based firms is one delivered through rapid organic growth

informational size and incentive compatibility we examine a general equilibrium model with asymmetrically informed agents the presence of asymmetric information generally presents a conflict between incentive com patibility 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 the incompatibility of pareto efficiency and incentive compatibility is a central theme in economics and game theory the issues associated with this incompatibility are particularly important in the design of resource allocation mechanisms in the presence of asymmetrically informed agents where the need to acquire information from agents in order to compute efficient outcomes and the incentives agents have to misrepresent that information for personal gain come into conflict despite a large literature that focuses on these issues there has been little work aimed at understanding those situations in which informational asymmetries are quantitatively important virtually every transaction is characterized by some asymmetry of information any investor who buys or sells a share of stock generally knows something rel evant to the value of the share that is not known to the person on the other side of the transaction in order to focus on more salient aspects of the problem many models rightly ignore the incentive problems associated with informa tional asymmetries in the belief that for the problem at hand agents are infor mationally small however few researchers have investigated the circumstances under which an analysis that ignores these incentive problems will yield results similar to those obtained when these problems are fully accounted for in this paper we study a class of mechanism design problems our goal is to formalize informational size in a way that when agents are informationally small 1 early versions of this paper circulated under the titles informational smallness and pareto effi ciency and informational smallness and incentive compatibility we thank jacques cremer dean foster andreu mas colell stephen morris david schmeidler and particularly faruk gul for help ful conversations and rajiv vohra for a very careful reading we also thank the numerous partici pants in seminars at which this paper was presented for helpful comments we also thank an editor and the referees for very helpful comments and thank ichiro obara for pointing out an error in an earlier version postlewaite gratefully acknowledges support from the national science foundation

the divergence of sic industries from antitrust markets some evidence from price fixing cases abstract evidence from price fixing cases is used to demonstrate that sic four digit industries often are far broader in product and or geographic scope than antitrust markets and that the divergence between the two is greater than suggested in the literature

informational robustness of competitive equilibria abstract consider an exchange economy with complete information we perturb this economy by assuming that each agent s observation about the true state of the world is noisy the paper investigates the robustness of equilibria of the complete information economy with respect to incomplete information we provide conditions under which complete information equilibria are limits of equilibria of the economies with incomplete information as the noise in the signal converges to zero journal of economic literature classification numbers d51 d82

the rate at which a simple market converges to efficiency as the number of traders increases an asymptotic result for optimal trading mechanisms private information in an independent private values market provides incentives to traders to manipulate equilibrium prices strategically this strategic behavior precludes ex post efficient market performance increasing the number of traders improves the efficiency of some trading mechanisms by enabling them to better utilize the private information traders bids and offers reveal this paper shows that the expected inefficiency of optimally designed mechanisms relative to ex post efficient allocations decreases almost quadratically as the number of traders increases