On core solutions in economies with asymmetric information
AbstractIn 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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 30258.
Date of creation: 10 Mar 2011
Date of revision: 12 Apr 2011
Coalitions; asymmetric information economies; information sharing; blocking mechanisms; core;
Find related papers by JEL classification:
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-07 (All new papers)
- NEP-CDM-2011-05-07 (Collective Decision-Making)
- NEP-CTA-2011-05-07 (Contract Theory & Applications)
- NEP-GTH-2011-05-07 (Game Theory)
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