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Implementation in partial equilibrium

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  • Hayashi, Takashi
  • Lombardi, Michele

Abstract

Consider a society with a finite number of sectors (social issues or commodities). In a partial equilibrium (PE) mechanism a sector authority (SA) aims to elicit agents' preference rankings for outcomes at hand, presuming separability of preferences, while such presumption is false in general and such isolated rankings might be artifacts. This paper studies what can be Nash implemented if we take such misspecification of PE analysis as a given institutional constraint. The objective is to uncover the kinds of complementarity across sectors that this institutional constraint is able to accommodate. Thus, in our implementation model there are several SAs, agents are constrained to submit their rankings to each SA separately and, moreover, SAs cannot communicate with each other. When a social choice rule (SCR) can be Nash implemented by a product set of PE mechanisms, we say that it can be Nash implemented in PE. We identify necessary conditions for SCRs to be Nash implemented in PE and show that they are also sufficient under a domain condition which identifies the kinds of admissible complementarities. Thus, the Nash implementation in PE of SCRs is examined in auction and matching environments.

Suggested Citation

  • Hayashi, Takashi & Lombardi, Michele, 2017. "Implementation in partial equilibrium," Journal of Economic Theory, Elsevier, vol. 169(C), pages 13-34.
    • Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:13-34
    DOI: 10.1016/j.jet.2017.01.008
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    Cited by:

    1. Hanaki, Nobuyuki & Hayashi, Takashi & Lombardi, Michele & Ogawa, Kazuhito, 2021. "Partial equilibrium mechanism and inter-sectoral coordination: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 366-389.
    2. Malachy James Gavan & Antonio Penta, 2022. "Safe Implementation," Working Papers 1363, Barcelona School of Economics.
    3. Hayashi, Takashi & Lombardi, Michele, 2019. "One-step-ahead implementation," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 110-126.
    4. Hayashi, Takashi & Lombardi, Michele, 2019. "Constrained implementation," Journal of Economic Theory, Elsevier, vol. 183(C), pages 546-567.
    5. Szulczyk, Kenneth R. & Ziaei, Sayyed Mahdi & Zhang, Changyong, 2021. "Environmental ramifications and economic viability of bioethanol production in Malaysia," Renewable Energy, Elsevier, vol. 172(C), pages 780-788.
    6. Gavan, Malachy James & Penta, Antonio, 2022. "Safe Implementation," TSE Working Papers 22-1369, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Implementation; Partial equilibrium; Complementarity; Income effect;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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