The type-agent core for exchange economies with asymmetric information

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Abstract

The type-agent core is a new solution concept for exchange economies with asymmetric information. It coincides with the set of subgame-perfect equilibrium outcomes of a simple competitive screening game. Uninformed intermediaries help the agents to cooperate in an attempt to make some profit. The paper extends the work of Perez-Castrillo [Cooperative outcomes through non-cooperative games, Games Econ. Behav. 7 (1994) 428–440] to exchange economies with non-transferable utility and asymmetric information. The type-agent core is a subset of Wilson's coarse core [Wilson, Information, efficiency, and the core of an economy, Econometrica 46 (1978) 807–816]. It is never empty, even though it may be a strict subset of Wilson's fine core. In addition, it converges towards the set of constrained market equilibria as the economy is replicated.

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    Citation Excerpt :

    Serrano and Vohra [23] provide non-cooperative support for the notion of a credible objection as a Bayesian equilibrium of a coalitional voting game. De Clippel [4] considers a competitive screening game in which uninformed intermediaries offer simultaneously contracts to each player, who chooses among them based on private information. The set of all subgame perfect equilibrium allocations coincides with the type-agent core, which is a non-empty refinement of the coarse core and a superset of the fine core.

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I wrote this paper while I was at Brown University, as a postdoctoral research associate. Special thanks go to Professors Francoise Forges, Enrico Minelli, Herakles Polemarchakis, Roberto Serrano and Rajiv Vohra for insightful discussions; the usual disclaimer applies.

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