A two-stage core with applications to asset market and differential information economies |
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Authors: | Leonidas C Koutsougeras |
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Institution: | (1) School of Economic Studies, University of Manchester, Manchester M139PL, UK, GB |
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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.
Received: December 20, 1995; revised version: December 6, 1996 |
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Keywords: | JEL Classification Number: D5 |
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