Jean-Jacques Laffont

Indirect public control of self-managed monopolies

Abstract How difficult is it and by what means is it possible to control a self-managed firm that has some monopoly power? To answer this question, classical modeling options are adopted: static framework, maximization by the firm of value added per capita. Three assumptions are added: perfect information on technologies by the Center, availability of unlimited lump-sum transfers and linear excise taxes, and market clearing. Attention is thus restricted to allocational problems, ruling out concern for distribution and regulation.

Nash and dominant strategy implementation in economic environments

Abstract When environments are ‘rich’, single-valued social choice functions which are implementable in Nash strategies are implementable in dominant strategies. Moreover the Gibbard–Satterthwaite impossibility theorem of implementation in dominant strategies has been extended to differential economic environments. Therefore it is important to study implementation for non-rich environments. We characterize for quasi-linear utility functions mechanisms which are implementable in dominant strategies (providing a generalization of the Groves–Clarke mechanisms) and in Nash strategies. This second type of mechanisms differ from the first only by the types of transfers they allow. Properties of these mechanisms such as balancedness, individual rationality and robustness with respect to coalitions are then studied.

RATIONAL EXPECTATIONS WITH IMPERFECT COMPETITION A Bertrand-Edgeworth Example *

We study a model in which price-setting oligopolists have private information about the commodity they sell. We construct an equilibrium in which some, but not all, of the information is transmitted by prices. We show that when the number of sellers increases, this equilibrium converges in distribution to the perfectly revealing competitive equilibrium.

On the robustness of strategy proof mechanisms

Abstract Following the Gibbard-Satterthwaite impossibility theorem, the incentives literature has explored restrictions on the domains of unknown characteristics which enable the implementation of some social choice rules by dominant strategy incentive compatible mechanisms. This paper makes precise the intuitive idea that, even when restrictions on preferences take the extreme form of finite- dimensional parametrizations, implementable social choice rules display a lack of robustness and in a sense made explicit are rare.

A test of the equilibrium hypothesis based on inventories: A communication

The theory of fix-price equilibria has offered a new challenging paradigm to economics. The empirical relevance of this paradigm remains to be proved, despite a number of efforts in this direction [see for example Fair and Jaffe (1972), Laffont and Garcia (1976)]. Most of the tests of the equilibrium hypothesis rely heavily on the specification of a price dynamics of a traditional type, i.e., price variations are proportional to excess demand. Green and Laffont (1981) suggested to complete the static fix-price equilibria by a price dynamics, called anticipatory pricing, in which prices, at the beginning of the period, are set at the values which clear expected excess demands and remain fixed during the period. This procedure has the advantage of yielding, a well defined and relatively simple dynamics of a number of key macroeconomic variables. The extremely simple model used in that paper gives in particular an inventory stock dynamic equation. The purpose of this note is to report our efforts to test the equilibrium hypothesis in that framework. In section 2 the model is briefly summarized to obtain the inventories equation. In section 3, the likelihood functions for the equilibrium hypothesis and the disequilibrium hypothesis are obtained. Results for the test of the equilibrium hypothesis with French and American data are reported in section 4 where it is shown that the equilibrium hypothesis is rejected.

Implementation Through Sequential Unanimity Games

In this chapter we study the implementation of social decision rules in a particular family of economic environments and by means of a particular type of sequential voting process. In these problems there are two agents, each of whom receives a real-valued piece of information. They must choose between two collective decisions: a status quo giving a known level of utility, and an alternative whose value to each of them depends positively on the information they both possess.