Informational Size and Incentive Compatibility

Abstract

We examine a general equilibrium model with asymmetrically 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 of sufficiently small informational size.

Aggregation of expert opinions

“…Our results bear a resemblance to those in McLean and Postlewaite (2002). That paper considered allocations in pure exchange economies in which agents had private information.…”

“…We postpone to Section 5 a discussion of the relationship of our results to the notion of informational size introduced in McLean and Postlewaite (2002).…”

Information and Small Group Effectiveness in Large Quasilinear Economies

“…As a different distribution of information, one can consider sequences of economies such that all agents are informationally small in the sense of McLean and Postlewaite (2002). As such, SGE holds in these settings, as there are no scarce types.…”

“…. , B m of T r somewhat different from the one in McLean and Postlewaite (2002). By doing so, for sufficiently large r, one can find an incentive compatible rule so that it allocates an ex post core allocation when…”

“…(In order for the argument to go through, one needs to take r larger than the one considered in McLean and Postlewaite (2002). To underscore the difference with Kamishiro (2011), we remark that that paper fixes the set of agents and assumes they have very accurate signals in order to establish nonemptiness of the exact coarse core, while we increase the number of agents and prove nonemptiness of approximate cores.)…”