An extensive form interpretation of the private core

Allan Muir (), Nicholas C. Yannelis () and Dionysius Glycopantis ()
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Allan Muir: Department of Mathematics, City University, Northampton Square, London EC1V 0HB, UK
Nicholas C. Yannelis: Department of Economics, University of Illinois at Urbana-Champaign, Champaign,IL 61820, USA
Dionysius Glycopantis: Department of Economics, City University, Northampton Square, London EC1V 0HB, UK

Economic Theory, 2001, vol. 18, issue 2, 293-319

Abstract: The private core of an economy with differential information, (Yannelis (1991)), is the set of all state-wise feasible and private information measurable allocations which cannot be dominated, in terms of ex ante expected utility functions, by state-wise feasible and private information measurable net trades of any coalition. It is coalitionally Bayesian incentive compatible and also takes into account the information superiority of an individual. We provide a noncooperative extensive form interpretation of the private core for three person games. We construct game trees which indicate the sequence of decisions and the information sets, and explain the rules for calculating ex ante expected payoffs. In the spirit of the Nash programme, the private core is thus shown to be supported by the perfect Bayesian equilibrium of a noncooperative game. The discussion contributes not only to the development of ideas but also to the understanding of the dynamics of how coalitionally incentive compatible contracts can be realized.

Keywords: Differential information economy; Private core; Weak fine core; Coalitional Bayesian incentive compatibility; Game trees; Perfect Bayesian equilibrium; Contracts; Nash Programme. (search for similar items in EconPapers)
Date: 2001-05-08
Note: Received: July 21, 2000; revised version: January 16, 2001
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