The Strong Sequential Core for Two-period Economies

The strong sequential core for two-stage economies with a possibly incomplete set of assets in period zero and trade in commodities in period one consists of those goods allocations that are in the classical core and moreover, after realization of the state of nature, in the core of the economy where executed asset contracts serve as initial endowments. The strong sequential core coincides with the classical core when all possible state-contingent contracts may serve as an asset. For nance economies it is shown that the strong sequential core is generically empty when there is an incomplete set of assets. Outside the setting of nance economies, we show that the strong sequential core can be empty even if there is a complete set of assets. If the set of constrained feasible allocations resulting from trading in assets, is enlarged to include also allocations outside the agents' consumption sets, then a complete set of assets is su cient for the equivalence of the resulting semi-strong sequential core and the classical core. Helpful comments of Andres Perea and of the participants of the European Workshop on General Equilibrium Theory, May 2001, Maastricht, are gratefully acknowledged. Department of Economics, Universiteit Maastricht, P.O. Box 616, 6200 MD Maastricht, The Netherlands. Tel.: +31-43-38883635, fax: +31-43-38884878, e-mail: [email protected], [email protected]. Department of Quantitative Economics, Universiteit Maastricht, P.O. Box 616, 6200 MD Maastricht, The Netherlands. Tel.: +31-43-3883288, fax: +31-43-3884874, e-mail: [email protected].