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Equilibria and incentives in private information economies

Xiang Sun, Yeneng Sun, Lei Wu and Nicholas C. Yannelis

Journal of Economic Theory, 2017, vol. 169, issue C, 474-488

Abstract: This paper considers three solution concepts in a large private information economy, namely, Walrasian expectations equilibrium, private core, and insurance equilibrium. It shows that these three concepts coincide with each other when the agents are informationally negligible in such an economy. In contrast to the finite-agent setting, one can construct a large private information economy in which incentive compatibility fails completely in the sense that almost every agent in any Walrasian expectations equilibrium/private core/insurance equilibrium allocation has the incentive to misreport her type.

Keywords: Asymmetric information; Incentive compatibility; Insurance equilibrium; Private core; Private information economy; Walrasian expectations equilibrium (search for similar items in EconPapers)
JEL-codes: D50 D70 D81 D82 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:jetheo:v:169:y:2017:i:c:p:474-488