Incentive compatibility and information superiority of the core of an economy with differential information

Summary We analyse the coarse, the fine, and the private core allocation of an exchange economy with differential information. The basic questions that we address are whether the above concepts are: (i) coalitionally incentive compatible, i.e., does truthful revelation of information in each coalition occur; and (ii) taking into account the information superiority or information advantage of an agent. Moreover, the above three concepts are examined in the presence of externalities and a comparison and interpretation of all of these core notions is provided.We wish to thank Stefan Krasa, Frank Page, Wayne Shafer, Anne Villamil, and Myrna Wooders for several useful comments, discussions, and suggestions. The comments of two referees were also helpful and we thank them for their careful reading. Obviously, we are responsible for any remaining errors.