Strategy-proofness versus efficiency in exchange economies: general domain properties and applications

Biung-Ghi Ju
December 20, 2001
Department of Economics
University of Kansas
Lawrence, KS66045, USA.
E-mail: bgju@ku.edu.

Abstract

We identify general domain properties that induce the non-existence of efficient, strategy-proof, and non-dictatorial rules in the 2-agent exchange economy. Applying these properties, we establish the impossibility result in several restricted domains; the "intertemporal exchange problem" (without saving technology) with preferences represented by the discounted sum of a temporal utility function, the "risk sharing problem" with risk averse expected utility preferences, the CES-preference domain, etc. None of the earlier studies applies to these domains.

Keywords: Strategy-proofness, efficiency, restricted domain, dictatorship.