On the Efficiency of Equilibrium with Transaction Costs

This paper defines a concept of efficiency for economies with transactions costs, called Nash efficiency, which characterizes (in the sense of the fundamental theorems of welfare economics) equilibrium allocations in these economies. In particular, it is shown that these allocations are Nash efficient and, under certain conditions, any Nash efficient allocation may be decentralized as an equilibrium with a system of lump-sum transfers. Copyright 1989 by The London School of Economics and Political Science

Economics · General equilibrium theory · Microeconomics · Transaction cost · Economic theories and models · Economic Theory and Institutions · Economic Theory and Policy