The representation problem and the efficiency of the price mechanism
type: Item
instance of: scholarly article
title: The representation problem and the efficiency of the price mechanism
zbMATH Open document ID: 0585.90009
DOI: 10.1016/0304-4068(85)90017-5
author: Donald G. Saari
published in: Journal of Mathematical Economics
publication date: 1985-01-01T00:00:00Z
full work available at URL: 607.pdf
review text: In mathematical economics, it is standard to represent an allocation function in terms of net trades. This is done to avoid imposing superfluous demands upon any implementing mechanism. It is shown that even for simple trading economies, this goal cannot always be attained with net trades. A theory is developed, in terms of techniques from differential geometry, to determine the most efficient (with respect to the design of a mechanism) representation of the allocation, and to characterize the associated implementing mechanisms. This theory is applied to the standard model of the price mechanism to show that it is the most efficient Pareto seeking mechanism (in terms of the dimension of the message space) and to a simple model to demonstrate how the optimal representation of the allocation and the type of information change with the addition of an externality.
Mathematics Subject Classification ID: 91B24
zbMATH DE Number: 3939041
zbMATH Keywords: differential geometry
zbMATH Keywords: representation of the allocation
zbMATH Keywords: most efficient Pareto seeking mechanism
zbMATH Keywords: optimal representation
MaRDI profile type: Publication
OpenAlex ID: W2087705950
cites work: The competitive allocation process is informationally efficient uniquely
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description: scientific article; zbMATH DE number 3939041