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A Convergent Demand Revealing Process

Suchanek, Gerry L. (1980) A Convergent Demand Revealing Process. Social Science Working Paper, 356. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20171006-155244023

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Abstract

Presented is a decentralized tâtonnement public good allocation process that converges to an efficient allocation in a wide class of two good neoclassical economies when consumers are permitted to be non-competitive utility maximizers. The process is a demand revealing mechanism generalized to include an enforcement rule administered by the government which defines a response function, making the government a dynamically active participant• in the allocation process. This generalization greatly improves upon the basic mechanism which has been considered extensively in the literature, and under which the government functions as a passive public good procurement agent when the model is formulated dynamically, solely processing information received from consumers and then implementing the implied demands. Inclusion of an enforcement rule permits the government to impose an intertemporal consistency requirement on the communications of individual consumers. It is shown that •there is an enforcement rule so that a strategy equilibrium is always attained asymptotically and so that the equilibrium allocation is efficient; in equilibrium, there is no waste, no bankruptcy and consumers communicate local truth.


Item Type:Report or Paper (Working Paper)
Additional Information:I would like to express my appreciation to Professor Jerome Goldstein and Professor Ronald Batchelder of the mathematics and economics departments, respectively, Tulane University, for their many helpful comments and criticisms of material presented in this paper. Errors that remain are, of course, my responsibility.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:356
Record Number:CaltechAUTHORS:20171006-155244023
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20171006-155244023
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82192
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:09 Oct 2017 22:23
Last Modified:03 Oct 2019 18:51

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