A general impossibility theorem and its application to individual rights

• We prove that it is impossible to find an incentive compatible social choice mechanism with finite social welfare losses.
• The impossibility also occur even if we replace incentive compatibility with approximately incentive compatibility.
• We discuss the compatibility problems between incentive and individual rights.

In this paper, we generalize Green and Laffont’s (1979) impossibility theorem to the following form: in quasi-linear environments, when the set of each agent’s types is sufficiently rich, we cannot find mechanisms that allow bounded deviations from the decisive efficiency, incentive compatibility and budget-balance at the same time. Hence, it is impossible to find an incentive compatible mechanism with minimum social welfare losses. Furthermore, we discuss the compatibility problems between incentive and individual rights in a quasi-linear environment (see Sen, 1970a,b; Deb et al., 1997). Specifically, some new impossibility results are established.