Nash Implementation in Production Economies with Unequal Skills: A Complete Characterization

In production economies with unequal labor skills, where the planner is ignorant to the set of feasible allocations in advance of production, the paper firstly introduces a new axiom, Non-manipulability of Irrelevant Skills (NIS), which together with Maskin Monotonicity constitute the necessary and sufficient con-ditions for Nash implementation. Secondly, the paper defines nat-ural mechanisms, and then fully characterizes Nash implementa-tion by natural mechanisms, using a slightly stronger variation of NIS and Supporting Price Independence. Following these char-acterizations, it is shown that there is a Maskin monotonic allo-cation rule which is not implementable when information about individual skills is absent. In contrast, many fair allocation rules, which are known to be non-implementable in the present litera-ture, are implementable by the natural mechanisms