The Equivalence of t-wise and Pareto Optimality

Abstract

We study the optimality of allocations obtained in an economy in which agents are not coordinated by a single consistent system like Walrasian auctioneer. In order to exploit all the opportunities for mutually beneficial trade, people must find a way to coordinate themselves beyond the limitation set by the incomplete market structure. We will consider economies whose market structure does not necessarily permit a full coordination, and completely characterize the condition which must be satisfied to guarantee a Pareto optimal outcome. Our result generalizes previous equivalence conditions.