Econometrica: Sep 2002, Volume 70, Issue 5

The Ex Ante Incentive Compatible Core in the Absence of Wealth Effects
p. 1865-1892

Françoise Forges, Jean–François Mertens, Rajiv Vohra

In a differential information economy with quasi–linear utilities, monetary transfers facilitate the fulfillment of incentive compatibility constraints: the associated ex ante core is generically nonempty. However, we exhibit a well–behaved exchange economy in which this core is empty, even if goods are allocated through random mechanisms.

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