Ex-Post Efficiency and Resource Allocation Under Uncertainty.

In this paper we propose a resource allocation mechanism which is "market like" as consumers use prices to guide decision making. Arrow-Debreu markets have the feature that ex-ante marginal rates of substitution are equated as all consumers face the same set of prices. When a state of the world is realized, however, the actual intertemporal marginal rates of substitution will differ across individuals unless all individuals have the same ex-ante beliefs. The resource allocation mechanism proposed in this paper corrects for these ex-post divergences among marginal rates of substitution by quoting to each individual ex ante a different set of prices, it turns out that each individual's personal prices for delivery of contingent commodities in any one state are proportional to a common price system, and the factor of proportionality is precisely equal to the subjective probability that the individual attaches to that state. [ABSTRACT FROM AUTHOR]