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The value allocation of an economy with differential information

In: Differential Information Economies

Author

Listed:
  • Stefan Krasa

    (University of Illinois at Urbana-Champaign)

  • Nicholas C. Yannelis

    (University of Illinois at Urbana-Champaign)

Abstract

Summary We analyze the Shapley value allocation of an economy with differential information. Since the intent of the Shapley value is to measure the sum of the expected marginal contributions made by an agent to any coalition that he/she belongs to, the value allocation of an economy with differential information provides an interesting way to measure the information advantage of an agent. This feature of the Shapley value allocation is not necessarily shared by the rational expectation equilibrium. Thus, we analyze the informational structure of an economy with differential information from a different and new viewpoint. In particular we address the following questions: How do coalitions of agents share their private information? How can one measure the information advantage or superiority of an agent? Is each agent’s private information verifiable by other members of a coalition? Do coalitions of agents pool their private information? Do agents have an incentive to report their true private information? What is the correct concept of a value allocation in an economy with differential information? Do value allocations exist in an economy with differential information? We provide answers to each of these questions.

Suggested Citation

  • Stefan Krasa & Nicholas C. Yannelis, 2005. "The value allocation of an economy with differential information," Studies in Economic Theory, in: Dionysius Glycopantis & Nicholas C. Yannelis (ed.), Differential Information Economies, pages 507-526, Springer.
    • Handle: RePEc:spr:steccp:978-3-540-26979-3_26
    DOI: 10.1007/3-540-26979-7_26
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