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The Core of a Production Economy with Asymmetric Information

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  • Ulrich Schwalbe

Abstract

The paper analyses the core of a production economy with asymmetric information. Due to the incompleteness of information the transactions an agent can make are restricted. However, if the agent joins a coalition, his information changes according to an exogenously given information rule. The production possibilities of a coalition are described by a technology set and information that the coalition can employ in production. This information depends on the information of the coalition members and is also described by an information rule. Given that the technology sets satisfy some regularity conditions, a production economy with asymmetric information generates a well‐defined cooperative game. It is shown that the core of this game and thus the core of the underlying economy is non‐empty provided that the technology sets satisfy a balancedness condition. This result holds independently of the given information rules.

Suggested Citation

  • Ulrich Schwalbe, 2003. "The Core of a Production Economy with Asymmetric Information," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 385-403, November.
    • Handle: RePEc:bla:metroe:v:54:y:2003:i:4:p:385-403
    DOI: 10.1111/1467-999X.00172
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    References listed on IDEAS

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    1. Françoise Forges & Aviad Heifetz & Enrico Minelli, 2005. "Incentive compatible core and competitive equilibria in differential information economies," Studies in Economic Theory, in: Dionysius Glycopantis & Nicholas C. Yannelis (ed.), Differential Information Economies, pages 185-201, Springer.
    2. Yannelis, Nicholas C, 1991. "The Core of an Economy with Differential Information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(2), pages 183-197, April.
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    5. Ulrich Schwalbe, 1999. "The core of an exchange economy with asymmetric information," Journal of Economics, Springer, vol. 70(2), pages 155-185, June.
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