The Weak Sequential Core for Two-Period Economies
Maastricht University - Department of Economics
P. Jean-Jacques Herings
Andrés Perea y Monsuwé
Universidad Carlos III de Madrid - Department of Economics
METEOR Research Memorandum Working Paper No. RM/02/011
We adapt the core concept to deal with economies in which trade in assets takes place at period 1, uncertainty about asset payoffs is released at period 2, and agents trade in commodities afterwards. We define the weak sequential core as the set of allocations that are stable against coalitional deviations ex ante, and moreover cannot be improved upon by any coalition once the uncertainty is being released. We restrict ourselves to credible deviations, i.e. coalitional deviations at period 1 that cannot be counterblocked by some subcoalition at period 2. We study the relationship of the resulting core concept with other sequential core concepts, give sufficient conditions under which the weak sequential core is non-empty, but show that it is possible to give reasonable examples where it is empty.
Number of Pages in PDF File: 30
Keywords: Core, Assets
JEL Classification: C71, C73, D52
Date posted: March 28, 2002
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