Efficient Incentive Compatible Economies Are Perfectly Competitive

Efficient, anonymous, and continuous mechanisms for exchange environments with a finite number of individuals are dominant strategy incentive compatible if and only if they are perfectly competitive, i.e., each individual is unable to influence prices or anyone's wealth. Equivalently, in such a mechanism each individual creates no externalities for others by her announcement of a type. The characterization applies whether preferences are ordinal or quasilinear, and it also applies to continuum economies. Perfectly competitive mechanisms are non-generic (although non-vacuous) in finite economies and are generic (but non-universal) in continuum economies. We use these results to provide bridges to related work.Journal of Economic LiteratureClassification Numbers: C72, D51, D62.