On Efficient Distribution With Private Information.

The paper is a study of the dynamics of the efficient distribution of consumption in an exchange c\economy with many consumers, each of whom is subject to private, idiosyncratic taste shocks. We propose a recursive method for finding feasible allocations that are meentive compatible and that are Pareto optimal within this e.t. The method is applied to serval parametric examples. We find that in an efficient allocation the degree of in equainty continually increases, with a diminishing fraction of the population receiving an increasing fraction of the resources. We discuss the extent to which these allocations can be decentralized via market arrangement. [ABSTRACT FROM AUTHOR]