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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)

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.

Suggested Citation

  • Leonidas C. Koutsougeras, 1998. "A two-stage core with applications to asset market and differential information economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 563-584.
    • 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. Predtetchinski, Arkadi & Herings, P. Jean-Jacques & Peters, Hans, 2002. "The strong sequential core for two-period economies," Journal of Mathematical Economics, Elsevier, vol. 38(4), pages 465-482, December.
    2. Bhowmik, Anuj, 2022. "On The Core Of An Economy With Arbitrary Consumption Sets And Asymmetric Information," MPRA Paper 115795, University Library of Munich, Germany.
    3. 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.
    4. Predtetchinski, Arkadi, 2007. "The strong sequential core for stationary cooperative games," Games and Economic Behavior, Elsevier, vol. 61(1), pages 50-66, October.
    5. Laszlo A. Koczy, 2019. "The risk-based core for cooperative games with uncertainty," CERS-IE WORKING PAPERS 1906, Institute of Economics, Centre for Economic and Regional Studies.
    6. Krasa, Stefan, 1999. "Unimprovable Allocations in Economies with Incomplete Information," Journal of Economic Theory, Elsevier, vol. 87(1), pages 144-168, July.
    7. Ulrich Schwalbe, 1999. "The core of an exchange economy with asymmetric information," Journal of Economics, Springer, vol. 70(2), pages 155-185, June.
    8. Habis, Helga & Herings, P. Jean-Jacques, 2011. "Core concepts for incomplete market economies," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 595-609.
    9. Valeriy M. Marakulin, 2017. "Contracts and domination in incomplete markets: what is a true core?," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 81-108, April.
    10. Ehud Lehrer & Marco Scarsini, 2013. "On the Core of Dynamic Cooperative Games," Dynamic Games and Applications, Springer, vol. 3(3), pages 359-373, September.
    11. Bhowmik Anuj & Gabriella Graziano Maria, 2020. "Blocking Coalitions and Fairness in Asset Markets and Asymmetric Information Economies," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(1), pages 1-29, January.
    12. Leonidas C. Koutsougeras, 2022. "Coalitions with limited coordination," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 439-456, April.

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