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A two-stage core with applications to asset market and differential information economies

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  • Leonidas C. Koutsougeras

    (School of Economic Studies, University of Manchester, Manchester M139PL, UK)

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    Abstract

    We introduce a new core concept, called the two-stage core, which is appropriate for economies with sequential trade. We prove a general existence theorem and present two applications of the two-stage core: (i) In asset markets economies where we extend our existence proof to the case of consumption sets with no lower bound, in order to capture the case of arbitrary short sales of assets. Further, we show that the two-stage core is non empty in the Hart (1975) example where a rational expectations equilibrium fails to exist. (ii) In differential information economies where we provide sufficient conditions for the incentive compatibility of trades. Namely, that no coalition of agents can misreport the true state and provide improvements to all its members, even by redistributing the benefits from misreporting.

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    Bibliographic Info

    Article provided by Springer in its journal Economic Theory.

    Volume (Year): 11 (1998)
    Issue (Month): 3 ()
    Pages: 563-584

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    Handle: RePEc:spr:joecth:v:11:y:1998:i:3:p:563-584

    Note: Received: December 20, 1995; revised version: December 6, 1996
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    Cited by:
    1. Krasa, Stefan, 1999. "Unimprovable Allocations in Economies with Incomplete Information," Journal of Economic Theory, Elsevier, vol. 87(1), pages 144-168, July.
    2. Helga Habis & P. Jean-Jacques Herings, 2011. "Core Concepts for Incomplete Market Economies," IEHAS Discussion Papers 1119, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    3. P.J.J. Herings & H. Peeters, 2001. "The Strong Sequential Core for Two-period Economies," Microeconomics 0111002, EconWPA.
    4. Habis, Helga, 2012. "Sztochasztikus csődjátékok - avagy hogyan osszunk szét egy bizonytalan méretű tortát?
      [Stochastic bankruptcy games. How can a cake of uncertain dimensions be divided?]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1299-1310.
    5. Ulrich Schwalbe, 1999. "The core of an exchange economy with asymmetric information," Journal of Economics, Springer, vol. 70(2), pages 155-185, June.
    6. Predtetchinski, Arkadi, 2007. "The strong sequential core for stationary cooperative games," Games and Economic Behavior, Elsevier, vol. 61(1), pages 50-66, October.

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