Testable Implications of Pareto Efficiency and Individualrationality

This paper investigates the testable implications of Pareto efficiency and individual rationality on finite data sets in exchange economies with finitely many commodities and agents. Efficiency alone provides no restrictions other than a trivial “no waste”-condition. Efficiency together with individual rationality implies robust restrictionsI appreciate the comments of Don Brown, Truman Bewley and Charles Steinhorn. I also thank seminar participants at Yale, Zuerich and Mainz, as well as conference participants at the 12th European General Equilibrium Workshop in Bielefeld. The generous support of the Cowles Foundation is gratefully acknowledged. The paper also benefited greatly from the comments of an anonymous referee