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The Ex Ante Incentive Compatible Core in the Absence of Wealth Effects

Françoise Forges, Jean-François Mertens, and Rajiv Vohra

Econometrica, 70, 1865-1892 (2002)

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 non-empty. 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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