Theoretical Economics 14 (2019), 15–38
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On the manipulability of efficient exchange rules
Ryan Tierney
Abstract
We identify a large subdomain, D, of quasilinear economies
on which any efficient exchange rule will be generically (in the Baire
sense) manipulable. For generic economies outside of D,
we find rules that are locally non-manipulable. The interior of the
set D consists of all economies in which competitive
equilibrium would prescribe that all agents consume a positive quantity
of money. Since we study quasilinear preferences, this is the domain
of primary interest. Our locally non-manipulable rules rely on the
existence of traders who are willing to sell all of their cash and
absorb the imbalances in the trading of the commodity.
Keywords: Exchange, incentive compatibility, budget balance
JEL classification: D44, D47
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