Incomplete Information, Incentive Compatibility, and the Core
AbstractWe consider an exchange economy in which agents possess private information at the time of engaging in state contingent contracts. While com-munication of private information is permitted, the true information state is not verifiable. The enforcement of contracts is, therefore, limited by incentive com-patibility constraints. We formalize a notion of the core for such an economy. Our analysis can be viewed as an attempt to incorporate incentive compatibility in Wilson's  coarse core, or as an attempt to introduce coalitional contracts in the Holmstrom-Myerson  notion of incentive efficiency. While there are some special cases in which the incentive compatible core is non-empty, our main result shows that this is not generally true.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 86 (1999)
Issue (Month): 1 (May)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- Rajiv Vohra, 1997. "Incomplete Information, Incentive Compatibility and the Core," Working Papers 97-11, Brown University, Department of Economics.
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
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