Incomplete Information, Incentive Compatibility and the Core

Rajiv Vohra ()

Working Papers from Brown University, Department of Economics

Abstract: We consider an exchange economy in which agents possess private information at the time of engaging in state contingent contracts. While com-munication of private information is permitted, the true information state is not verifiable. The enforcement of contracts is, therefore, limited by incentive com-patibility constraints. We formalize a notion of the core for such an economy. Our analysis can be viewed as an attempt to incorporate incentive compatibility in Wilson's [1978] coarse core, or as an attempt to introduce coalitional contracts in the Holmstrom-Myerson [1983] notion of incentive efficiency. While there are some special cases in which the incentive compatible core is non-empty, our main result shows that this is not generally true.

Keywords: Game theory; Economic models (search for similar items in EconPapers)
JEL-codes: C71 C72 D51 (search for similar items in EconPapers)
Date: 1997
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Journal Article: Incomplete Information, Incentive Compatibility, and the Core (1999)
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Persistent link: http://EconPapers.repec.org/RePEc:bro:econwp:97-11

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