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A two-stage core with applications to asset market and differential information economiesw

Leonidas C. Koutsougeras
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Leonidas C. Koutsougeras: University of Manchester

A chapter in Differential Information Economies, 2005, pp 135-156 from Springer

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.

Keywords: Competitive Equilibrium; Incentive Compatibility; Asset Market; Period Trad; Core Allocation (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:steccp:978-3-540-26979-3_8

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DOI: 10.1007/3-540-26979-7_8

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