Enrico Minelli

Incentives and the core of an exchange economy: a survey

This paper provides a general overview of the literature on the core of an exchange economy with asymetric information. Incentive compatibility is emphasized in studying core concepts at the ex ante and the interim stage.The analysis includes issues of non emptiness of the core as wellas core convergence to price equilibrium allocations.

Credit Market Failures and Policy

In a simple model of the credit market, based on Stiglitz-Weiss (1981), equilibria are computed and optimal policies to correct market failures are characterized. Some widely applied policies, notably interest-rate subsidies and investment subsidies, are compared to theoretical optimum, and an alternative optimal policy is described which we argue is more robust to model misspecification. An insight on the trade-off between credit policy and infrastructural investment is also offered. A discussion of some aspects of regional policy in Italys Mezzogiorno is finally presented as an application of the analysis.

A Note on the Incentive Compatible Core

We identify particular exchange economies with asymmetric information in which the ex ante incentive compatible core is nonempty provided that coalitions can allocate goods by means of random mechanisms. Both the use of random mechanisms and the restriction to a specific class of economies are crucial for the result. Indeed, the ex ante incentive compatible core can be empty (i) in our class of economies if coalitions can only use deterministic mechanisms and (ii) outside this class, even if random mechanisms are allowed.

Two remarks on the inner core

For the case of smooth concave exchange economies, we provide a characterization of the inner core as the set of feasible allocations such that no coalition can improve on it, even if coalitions are allowed to use some random plans. For the case of compactly generated games, we discuss Myersons definition of the inner core, and we characterize it using lexicographic utility weight systems.

Information at equilibrium

Summary. In a game with rational expectations, individuals simultaneously refine their information with the information revealed by the strategies of other individuals. At a Nash equilibrium of a game with rational expectations, the information of individuals is essentially symmetric: the same profile of strategies is also an equilibrium of a game with symmetric information; and strategies are common knowledge. If each player has a veto act, which yields a minimum payoff that no other profile of strategies attains, then the veto profile is the only Nash equilibrium, and it is is an equilibrium with rational expectations and essentially symmetric information; which accounts for the impossibility of speculation.

Informational smallness in rational expectations equilibria

In an economy with asymmetric information, Rational Expectations Equilibria (REE) need not become asymptotically incentive compatible, even if many independent replicas of the economy are merged together. We identify a sub-class of REE for which this is nevertheless the case.

Trade and Welfare

Domestic transfers such that all individuals gain in utility with international trade, compared to domestic autarky, need not exist.

Corrigendum to “Self-fulfilling mechanisms and rational expectations” [J. Econ. Theory 75 (1997) 388–406]☆

A basic feature of the market game Γ (E) is that each player is one of a continuum of replicas of an agent of the underlying economy E. The proof of Theorem 2 constructs an equilibrium in which the players use the first stage of the repeated game to mimic the self-fulfilling mechanism. Unilateral deviations at the first stage cannot be detected and have no impact on the information that is revealed. Such deviations are thus useless in the infinitely repeated game. However, if the game has a finite horizon T , a player may benefit from playing a best response to the other players’ strategies at the first stage.1

An economic theorists' reading of Simone Weil

In Economics individuals are defined by their preferences over the consequences of their own actions and the actions carried out by others. In contrast, Simone Weil depicts the individual as continuously re-constituted by the contact that he establishes with reality via his action. Such an action is aimed at achieving an effect in the physical world, but what makes it human is not success per se, but rather the fact that it stems from reasoning and planning. Affliction is caused by effort carried out mechanically like that of a beast of burden, when the individual has no opportunity to exercise reason for choosing how to confront realitys ever-challenging hazards and necessity.

Efficienza delle regole e responsabilizzazione dei politici

Allocative and redistributive rules in the public sector are often less contingent on available information than normative theory would suggest. In this paper we offer a political economy explanation. Under different rules, even if the observable outcomes of policies remain the same, the informational content which can be extracted by these observations is different. Simpler rules are more transparent because they allow citizens to gain more information on politicians. Since there are limits to what voters can observe, this may be a relevant insight into the functioning of the political system. We present several institutional examples supporting our argument and discuss a simple model which supports our theory. By using the same model, we also carefully discuss the links and the differences with several other strands of literature, such as the macroeconomic trade-off between rules and discretionality and the principal-supervisor-agent model in the regulatory context. Finally, we offer suggestions for further developments and possible empirical tests of the theory dicussed here.