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Many economic models include random shocks imposed on a large number (continuum) of economic agents with individual risk. In this context, an exact law of large numbers and its converse is presented in [23] to characterize the cancelation of individual risk via aggregation. However, it is well known that the Lebesgue unit interval is not suitable for… (More)

The idea of perfect competition for an economy with asymmetric information is formalized via an id-iosyncratic signal process in which the private signals of almost every individual agent can influence only a negligible group of agents, and the individual agents' relevant signals are essentially pairwise independent conditioned on the true states of nature.… (More)

This paper provides micro-foundations for independent random matching of a large population , as widely used in the economics literature. We consider both static and dynamic systems with random mutation, partial matching arising from search, and type changes induced by matching. Under independence assumptions at each randomization step, we show that there… (More)

We present a comprehensive theory of large games in which players have names and determinate social-types and/or biological traits, and identify through four decisive examples, essentially based on a matching-pennies type game, pathologies arising from the use of a Lebesgue interval for player's names. In a sufficiently general context of traits and… (More)

We show that when agents become informationally negligible in a large economy with asymmetric information, every ex ante efficient allocation must be incentive compatible. This means that any ex ante core or Walrasian allocation is incentive compatible. The corresponding result is false for fixed finite-agent economies with asymmetric information. An… (More)

The Loeb space construction in nonstandard analysis is applied to the theory of processes to reveal basic phenomena which cannot be treated using classical methods. An asymptotic interpretation of results established here shows that for a triangular array (or a sequence) of random variables, asymptotic uncorrelatedness or asymptotic pairwise independence is… (More)

- Bin Liu, Jingfeng Lu, Ruqu Wang, Jun Zhang, James Atsu Amegashie, Tilman Börgers +16 others
- 2013

This paper studies the optimal contest design problem when the abilities of the risk neutral contestants are independent private information. The contest designer has a fixed prize budget to elicit efforts from the contestants. We consider all possible mechanisms that allocate prizes and punishments (negative prizes) across the contestants. We find that an… (More)