Decentralization of intertemporal economies with discounted maximin criterion.
The intertemporal decentralization literature scrutinizes the ability of markets to achieve dynamically optimal allocation of resources. Put differently, it examines the possibility of designing a mechanism enabling short-lived agents to make independent decisions compatible with long-run optimum....
| Published in: | International Economic Review Vol. 41; no. 4; pp. 1021 - 1048 |
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| Format: | Article |
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Wiley-Blackwell
November 2000
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| Online Access: | View this record in EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=513035979&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 513035979 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00206598 IER jtl: International Economic Review issn: 00206598 maglogo: N pubinfo: dt: November 2000 vid: 41 iid: 4 pid: 480 pub: Wiley-Blackwell artinfo: ui: 513035979 10.1111/1468-2354.00094 ppf: 1021 ppct: 27 formats: tig: atl: Decentralization of intertemporal economies with discounted maximin criterion. aug: au: Kaganovich, Michael su: Resource allocation -- Mathematical models Nash equilibrium Information theory in economics Economic decision making sug: subj: Resource allocation -- Mathematical models Nash equilibrium Information theory in economics Economic decision making ab: The intertemporal decentralization literature scrutinizes the ability of markets to achieve dynamically optimal allocation of resources. Put differently, it examines the possibility of designing a mechanism enabling short-lived agents to make independent decisions compatible with long-run optimum. The Hurwicz and Weinberger impossibility result states that the mechanisms that are both privacy preserving and optimal fail to exist when an infinite-horizon optimum is defined by Ramsey-type criteria with discounting. However, for a special case where the economy cannot sustain growth and agents do not discount future utilities, it is known that a decentralized mechanism using rolling plans is in a certain sense asymptotically optimal. To address the problem of possibility of decentralization mechanisms in a sustainable growth economy with discounting, I consider a “discounted maximin” optimality criterion. It selects the programs that sustain growth at a given rate. The article argues that this criterion is consistent with the principles of intergenerational justice, which can be defined in terms of intergenerational Nash equilibrium. Furthermore, the article demonstrates that a decentralized mechanism designed on the basis of rolling plans generates decisions that are asymptotically optimal in terms of the discounted maximin. Reprinted by permission of the publisher. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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