Information, Uncertainty and the Core

32 Pages Posted: 5 Mar 2012  

R. R. Routledge

University of Liverpool

Date Written: March 3, 2012

Abstract

How are contracts formed when agents face uncertainty, have asymmetric information and cannot write binding agreements? In this paper we propose a solution to this problem. Agents can discuss state-contingent allocations but cannot write binding contracts. At any stage in the contract formation phase a coalition of agents can deviate and choose to form agreements amongst themselves. However, we restrict these deviations to be credible: meaning that no sub-coalition has a further credible deviation. In this context, we propose the coarse and fine weak sequential cores as solution concepts and sufficient conditions for the non-emptiness of these solution concepts are provided.

Keywords: credible deviations, contract formation, cooperative games, asymmetric information

JEL Classification: C71, C73

Suggested Citation

Routledge, R. R., Information, Uncertainty and the Core (March 3, 2012). Available at SSRN: https://ssrn.com/abstract=2015414 or http://dx.doi.org/10.2139/ssrn.2015414

R. R. Routledge (Contact Author)

University of Liverpool ( email )

Liverpool, L69 7ZA
United Kingdom

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