The core of economies with asymmetric information (Q1297720)

Information in economics may be a separate commodity with specific properties, but more often its role is to describe what agents know about the economy. In the latter case, with which this book is concerned, it does not enter the utility functions of the agents. One can distinguish between uncertainty and asymmetric (or differential) information. In case of uncertainty (or risk) there is symmetric lack of information. In general equilibrium theory this was already dealt with in the Arrow-Debreu model. In case of asymmetric information there is also lack of information but not to the same extent for all agents in the economy. Asymmetric information has been extensively dealt with in the branch of economics usually called information economics: principal agent theory, contract theory, and more generally, the theory of noncooperative games. All these approaches basically concern partial equilibrium models. The literature on asymmetric information in general equilibrium models is much more limited. In fact, this book discusses a substantial part of this literature, namely the part on the core of economies with asymmetric information. This literature consists of just a few references: mainly earlier references to the work of Böhm, Wilson a.o., and somewhat later references to Allen, Yannelis a.o. The covering in the book is fairly complete although some recent and as far as I know unpublished work of e.g. F. Forges is not mentioned. The general idea of economies (with or without production) with asymmetric information is to model the agents' information by the familiar approach of partitions over the possible states of the world. Agents are endowed with such partitions but in coalitions may also exchange information. The later is governed by an information rule. The idea of feasible (re)allocations is extended to accommodate the information that agents have, and which depends on the information rule that is employed. In particular, allocations have to be measurable with respect to this information. Different assumptions with respect to information rules thus lead to different core concepts. After a general introduction on economies with asymmetric information, Chapter 2 of this book discusses the existing literature on the core. Chapters 3 and 4, on pure exchange economies and economies with production, respectively, present extensions by the author of this literature, in particular by allowing more general information rules and by modeling information as an integral part of allocations. The main results are existence results, obtained in the more or less familiar way by proving balancedness of associated cooperative nontransferable utility games. This book is very clearly written. It can be recommended as a first reading to any one who is already familiar with the basics of general equilibrium theory and cooperative game theory and who wants to get acquainted with this fascinating field of general equilibrium theory with asymmetric information. This area is characterized by an abundance of open questions, mentioned in the Conclusion of the book.