In this paper I examine the socially optimal allocation in a random matching economy. The optimal allocation is supported by punishment to defections, using the public record of agents<92> transaction. However, public record-keeping is imperfect, as an agent<92>s transaction is updated into the public...</92></92>

In this paper I examine how the socially optimal allocation, and specialization in particular, depends on the extent of the market. I interpret the society’s ability to keep transaction records as the extent of the market and measure it by a probability <InlineEquation ID="Equ1"> <EquationSource Format="TEX">$\rho \in (0,1)$</EquationSource> </InlineEquation> with which the...</equationsource></inlineequation>