The anonymous core of an exchange economy. (Q1867765): Difference between revisions

The purpose of this paper is threefold: (1) to introduce the notion of the anonymous core of an exchange economy, (2) to establish some of its important properties, and (3) to discuss the implications of this concept on the problem of second-best insurance provision. The author defines the notion of the anonymous (or, synonymously, envy-free) core of an exchange economy as the set of the consumption allocations that cannot be objected (blocked) by any coalition via an allocation satisfying the following dual anonymity requirements: (a) First, any member of the coalition does not prefer any other consumption bundle arising in the objecting allocation to the one given to him. (b) Second, any non-member (a consumer who does not belong to the coalition) does not prefer any consumption bundle arising in the objecting allocation to the bundle he receives at the objected allocation (status quo). The second objective of the paper is to establish two important properties of the newly introduced notion of the anonymous core. The author proves an equivalence theorem between the anonymous core of an exchange economy and the set of the Walrasian equilibrium allocations in an atomless economy. The proof method of the equivalence theorem relies much on that of the equivalence theorem for a bargaining set [\textit{A. Mas-Colell} and \textit{J. Silvestre}, J. Econ. Theory 47, 239--256 (1989; Zbl 0672.90020) and \textit{J. Geanakoplos} and \textit{A. Mas-Collel}, ibid. 47, 22--38 (1989; Zbl 0659.90026)]. Another interesting result in the anonymous core is to establish, under smoothness assumptions on preferences, the generic limit theorem for a sequence of replica economies. The novelty in proving the generic limit theorem is that the author defines and uses the concept of regularity of Walrasian objections in continuum economies, being inspired by the notion of regular equilibrium in linear production economies, with the constructing objections in finite economies. Finally, the implications of the anonymous core and the equivalence theorem between the anonymous core and the set of Walrasian equilibrium allocations are evaluated for the second-best insurance problem. The relationship with the literature on various core concepts under asymmetric information is also pointed out.