On extensive form implementation of contracts in differential information economies

Abstract

In the context of differential information economies, with and without free disposal, we consider the concepts of Radner equilibrium, rational expectations equilibrium, private core, weak fine core and weak fine value. We look into the possible implementation of these concepts as perfect Bayesian or sequential equilibria of noncooperative dynamic formulations. We construct relevant game trees which indicate the sequence of decisions and the information sets, and explain the rules for calculating ex ante expected payoffs. The possibility of implementing an allocation is related to whether or not it is incentive compatible. Implementation through an exogenous third party or an endogenous intermediary is also considered.