Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/59691 
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dc.contributor.authorDe Castro, Luciano I.en
dc.contributor.authorYannelis, Nicholas C.en
dc.date.accessioned2011-08-04-
dc.date.accessioned2012-07-12T12:34:35Z-
dc.date.available2012-07-12T12:34:35Z-
dc.date.issued2010-
dc.identifier.urihttp://hdl.handle.net/10419/59691-
dc.description.abstractThe conflict between Pareto optimality and incentive compatibility, that is, the fact that some Pareto optimal (efficient) allocations are not incentive compatible is a fundamental fact in information economics, mechanism design and general equilibrium with asymmetric information. This important result was obtained assuming that the individuals are expected utility maximizers. Although this assumption is central to Harsanyi's approach to games with incomplete information, it is not the only one reasonable. In fact, a huge literature criticizes EU's shortcomings and propose alternative preferences. Thus, a natural question arises: does the mentioned conflict extend to other preferences? We show that when individuals have (a special form of) maximin expected utility (MEU) preferences, then any efficient allocation is incentive compatible. Conversely, only MEU preferences have this property. We also provide applications of our results to mechanism design and show that Myerson-Satterthwaite's negative result ceases to hold in our MEU framework.en
dc.language.isoengen
dc.publisher|aNorthwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science |cEvanston, ILen
dc.relation.ispartofseries|aDiscussion Paper |x1532en
dc.subject.jelD50en
dc.subject.jelD81en
dc.subject.jelD82en
dc.subject.ddc330en
dc.subject.keywordasymmetric informationen
dc.subject.keywordambiguity aversionen
dc.subject.keywordincentive compatibilityen
dc.subject.keywordmechanism designen
dc.subject.keywordfirst-besten
dc.subject.keywordsecond-besten
dc.titleAmbiguity aversion solves the conflict between efficiency and incentive compatibility-
dc.typeWorking Paperen
dc.identifier.ppn665458568en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:nwu:cmsems:1532en

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