Equilibrium Blocking in Large Quasilinear Economies
Brown Economics Working Paper Series
42 Pages Posted: 12 Oct 2009
Date Written: October 8, 2009
We study information transmission in large interim quasilinear economies using the theory of the core. We concentrate on the core with respect to equilibrium blocking, a core notion in which information is transmitted endogenously within coalitions, as blocking can be understood as an equilibrium of a communication mechanism used by players in coalitions. We consider independent, ex-post and signal-based replicas of the basic economy. For each, we offer an array of negative and positive convergence results as a function of the complexity of the mechanisms used by coalitions. We identify conditions under which asymmetric information remains as an externality and non-market outcomes stay in the core, as well as those for the core to converge to the set of incentive compatible ex-post Walrasian allocations. Further, all the results are robust to the relaxation of the incentive constraints, and hence suggest a process through which information may get incorporated into a fully revealing equilibrium price function.
Keywords: Core w.r.t. Equilibrium Blocking, Core Convergence, Independent
JEL Classification: C71, C72, D51, D82
Suggested Citation: Suggested Citation