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arXiv · 1609.02423

The Incentive Ratio in Exchange Economies

Ido Polak
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Abstract

The incentive ratio measures the utility gains from strategic behaviour. Without any restrictions on the setup, ratios for linear, Leontief and Cobb-Douglas exchange markets are unbounded, showing that manipulating the equilibrium is a worthwhile endeavour, even if it is computationally challenging. Such unbounded improvements can be achieved even if agents only misreport their utility functions. This provides a sharp contrast with previous results from Fisher markets. When the Cobb-Douglas setup is more restrictive, the maximum utility gain is bounded by the number of commodities. By means of an example, we show that it is possible to exceed a known upper bound for Fisher markets in exchange economies.

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Ido Polak. 2016-09-08. The Incentive Ratio in Exchange Economies. https://arxiv.org/abs/1609.02423

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