Generic efficiency and collusion-proofness in exchange economies

The purpose of this paper is to study the kind of e‰cient allocations that can be achieved in exchange economies with asymmetric information, by means of a decentralized mechanism robust to coalitional, strategic deviations. To this end, we define a new strategic equilibrium concept – called strong collusion-proof contract – designed to characterize stable communication agreements in games with di¤erential information against non-binding, self-enforcing and incentive compatible deviations by coalitions. We then construct a strategic market mechanism which, for quasi-linear economies, is such that its strong collusion-proof contracts generically induce the incentive compatible interim e‰cient allocations. Moreover, we show that these allocations can be achieved by strong collusion-proof contracts. We show that the internally consistent extension of the strong collusion-proof contracts generically yields the same set of e‰cient allocations.