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On core solutions in economies with asymmetric information

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  • Herves-Beloso, Carlos
  • Meo, Claudia
  • Moreno Garcia, Emma

Abstract

In a scenario with a continuum of asymmetrically informed agents, we analyze how the initial information of a trader may be altered when she becomes a member of a coalition. In contrast to a perfect competition frame, we first show that neither arbitrarily small coalitions nor large coalitions are enough to block an allocation which is not in the core, due to the market failure produced by asymmetric information. However, under mild assumptions, we extend the characterizations of the core provided by Vind and Schmeidler (1972) to economies with asymmetrically informed traders. We then focus on information sharing rules based on the coalitions' size. Assuming the existence of coalitions to which the sharing rule associates an information finer than all the others, we show that the corresponding cores coincide with the one defined by this finest information. Finally, characterizations for the weak fine, the fine and the private core are obtained as particular cases of this equivalence theorem.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30258.

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Date of creation: 10 Mar 2011
Date of revision: 12 Apr 2011
Handle: RePEc:pra:mprapa:30258

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Keywords: Coalitions; asymmetric information economies; information sharing; blocking mechanisms; core;

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References

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  1. Yannelis, Nicholas C, 1991. "The Core of an Economy with Differential Information," Economic Theory, Springer, Springer, vol. 1(2), pages 183-97, April.
  2. Marialaura Pesce, 2010. "On mixed markets with asymmetric information," Economic Theory, Springer, Springer, vol. 45(1), pages 23-53, October.
  3. Roberto Serrano & Rajiv Vohra & Oscar Volij, 1999. "On the Failure of Core Convergence in Economies with Asymmetric Information," Economic theory and game theory, Oscar Volij 011, Oscar Volij.
  4. Evren, Özgür & Hüsseinov, Farhad, 2008. "Theorems on the core of an economy with infinitely many commodities and consumers," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1180-1196, December.
  5. Carlos Hervés-Beloso & Emma Moreno-García & Nicholas Yannelis, 2005. "Characterization and incentive compatibility of Walrasian expectations equilibrium in infinite dimensional commodity spaces," Economic Theory, Springer, Springer, vol. 26(2), pages 361-381, 08.
  6. Grodal, Birgit, 1972. "A Second Remark on the Core of an Atomless Economy," Econometrica, Econometric Society, Econometric Society, vol. 40(3), pages 581-83, May.
  7. Schmeidler, David, 1972. "A Remark on the Core of an Atomless Economy," Econometrica, Econometric Society, Econometric Society, vol. 40(3), pages 579-80, May.
  8. Herves-Beloso, Carlos & Moreno-Garcia, Emma & Yannelis, Nicholas C., 2005. "An equivalence theorem for a differential information economy," Journal of Mathematical Economics, Elsevier, vol. 41(7), pages 844-856, November.
  9. Herves-Beloso, Carlos & Moreno-Garcia, Emma & Nunez-Sanz, Carmelo & Rui Pascoa, Mario, 2000. "Blocking Efficacy of Small Coalitions in Myopic Economies," Journal of Economic Theory, Elsevier, Elsevier, vol. 93(1), pages 72-86, July.
  10. Beth Allen, 2006. "Market games with asymmetric information: the core," Economic Theory, Springer, Springer, vol. 29(2), pages 465-487, October.
  11. Vind, Karl, 1972. "A Third Remark on the Core of an Atomless Economy," Econometrica, Econometric Society, Econometric Society, vol. 40(3), pages 585-86, May.
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Cited by:
  1. Bhowmik, Anuj & Cao, Jiling, 2012. "Blocking efficiency in an economy with asymmetric information," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 396-403.

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