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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan


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Blocking Coalitions and Fairness in Asset Markets and Asymmetric Information Economies

Anuj Bhowmik
  • Indira Gandhi Institute of Development Research, Santosh Nagar, Film City Road, Goregaon (East), Mumbai 400 065, India
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/ Maria Gabriella Graziano
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  • Department of Economics and Statistics, University of Naples Federico II and CSEF, Complesso Monte S. Angelo, Via Cintia, 80126 Napoli, Italy
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Published Online: 2019-09-20 | DOI: https://doi.org/10.1515/bejte-2018-0139

Abstract

This paper analyses two properties of the core in a two-period exchange economy under uncertainty: the veto power of arbitrary sized coalitions; and coalitional fairness of core allocations. We study these properties in relation to classical (static) and sequential (dynamic) core notions and apply our results to asset markets and asymmetric information models. We develop a formal setting where consumption sets have no lower bound and impose a series of general restrictions on the first period trades of each agent. All our results are applications of the same lemma about improvements to an allocation that is either non-core or non-coalitionally fair. Roughly speaking, the lemma states that if all the members of a coalition achieve a better allocation in some way (for instance, by blocking the status quo allocation or because they envy the net trade of other coalitions) then an alternative improvement can be obtained through a perturbation of the initial improvement.

Keywords: asymmetric information economies; assets markets; core; sequential core; coalitions and fairness

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About the article

Published Online: 2019-09-20


Citation Information: The B.E. Journal of Theoretical Economics, Volume 20, Issue 1, 20180139, ISSN (Online) 1935-1704, DOI: https://doi.org/10.1515/bejte-2018-0139.

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