Optimal intertemporal allocation mechanisms and decentralization of decisions
type: Item
instance of: scholarly article
title: Optimal intertemporal allocation mechanisms and decentralization of decisions
zbMATH Open document ID: 0656.90021
DOI: 10.1016/0022-0531(88)90268-2
author: Leonid Hurwicz
author: Mukul Majumdar
published in: Journal of Economic Theory
publication date: 1988-01-01T00:00:00Z
review text: When the planning horizon is unbounded and the number of agents infinite intertemporal profit maximization does not guarantee efficiency [\textit{E. Malinvaud}, Econometrica 21, 233-268 (1953; Zbl 0052.160)]. An additional condition such as ``terminal cost minimization'' or a ``transversality condition'' becomes indispensible. The problem with these additional assumptions is - as it has been pointed out by \textit{T. C. Koopmans} (1957) - that one cannot imagine how they could be sustained by ``decentralized'' decision making. The objective of this paper is to conceptualize the idea of informationally decentralized mechanisms in an infinite horizon model in which decision makers are finite-lived. The results are essentially impossibility theorems. One theorems states ``that, provided the class of a priori admissible environments is sufficiently rich, it is impossible to design a temporally decentralized mechanism that is both non-wasteful and unbiased''. (The latter two concepts are based on the notion of efficiency rather than optimality, and do not involve the knowledge of preferences.) Similar impossibility results are obtained if the ``discounted sum of felicities'' is maximized subject to time-varying non-stationary technologies. ``It is impossible to design a temporally decentralized mechanism guaranteeing optimality.'' There is only one noteworthy exception, namely, if the felicity function is logarithmic and the technologies linear.
Mathematics Subject Classification ID: 91B62
zbMATH DE Number: 4072666
zbMATH Keywords: informationally decentralized mechanisms
zbMATH Keywords: infinite horizon model
zbMATH Keywords: impossibility theorems
zbMATH Keywords: efficiency
zbMATH Keywords: felicity function
reviewed by: Wolfram F. Richter
MaRDI profile type: Publication
full work available at URL: 0022-0531(88)90268-2
OpenAlex ID: W2013525498
cites work: Q3854875
cites work: Q5342860
cites work: Q5668220
cites work: Q3745572
cites work: Some Remarks on Optimal Growth with Intertemporally Dependent Preferences in the Neoclassical Model
cites work: Capital Accumulation and Efficient Allocation of Resources
cites work: On optimal growth under uncertainty
cites work: A note on the role of the transversality condition in signalling capital overaccumulation
cites work: Q5558820
Recommended article: Q3740510
Recommended article: A necessary condition for decentralization and an application to intertemporal allocation
Recommended article: Information structures and decentralizability of equilibria
Recommended article: Competitive finite value prices: A complete characterization
Recommended article: Decentralization in infinite horizon economies: An introduction
Recommended article: Incentive compatibility and individual rationality in public good economies
Recommended article: On characterizing optimality of stochastic competitive processes
Recommended article: Hard evidence and ambiguity aversion
Recommended article: Communication complexity and stability of equilibria in economies and games
Recommended article: Incentive compatibility and informational requirements
description: scientific article; zbMATH DE number 4072666