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Equilibria and incentives in private information economies

Author

Listed:
  • Sun, Xiang
  • Sun, Yeneng
  • Wu, Lei
  • Yannelis, Nicholas C.

Abstract

This paper considers three solution concepts in a large private information economy, namely, Walrasian expectations equilibrium, private core, and insurance equilibrium. It shows that these three concepts coincide with each other when the agents are informationally negligible in such an economy. In contrast to the finite-agent setting, one can construct a large private information economy in which incentive compatibility fails completely in the sense that almost every agent in any Walrasian expectations equilibrium/private core/insurance equilibrium allocation has the incentive to misreport her type.

Suggested Citation

  • Sun, Xiang & Sun, Yeneng & Wu, Lei & Yannelis, Nicholas C., 2017. "Equilibria and incentives in private information economies," Journal of Economic Theory, Elsevier, vol. 169(C), pages 474-488.
  • Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:474-488
    DOI: 10.1016/j.jet.2017.02.010
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric information; Incentive compatibility; Insurance equilibrium; Private core; Private information economy; Walrasian expectations equilibrium;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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