Information at a Competitive Equilibrium.

Asymmetric information concerns either commodities or mutually exclusive states of the world. The notion of competitive equilibrium differs between the two cases. In particular, incentive compatibility constraints are only relevant in the case of asymmetric information concerning mutually exclusive states of the world, where it is important whether trades are enforceable and whether trades occur before or after individuals receive private information. In either case, competitive equilibria exist under standard assumptions; they may be determinate, but fail to satisfy a notion of Pareto optimality.