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A two-stage core with applications to asset market and differential information economiesw

In: Differential Information Economies

Author

Listed:
  • Leonidas C. Koutsougeras

    (University of Manchester)

Abstract

Summary 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, 2005. "A two-stage core with applications to asset market and differential information economiesw," Studies in Economic Theory, in: Dionysius Glycopantis & Nicholas C. Yannelis (ed.), Differential Information Economies, pages 135-156, Springer.
    • Handle: RePEc:spr:steccp:978-3-540-26979-3_8
    DOI: 10.1007/3-540-26979-7_8
    as

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