Bounded rational learning in differential information economies: core and value

We apply the private core and the private value to a dynamic economy and study the evolution of private core and private value allocations as individuals acquire information Ž . learn through time. In particular, a realized agreement in each period generates information that changes the underlying information structure in the economy. Since the private Ž . core value depends on the distribution of information across individuals, when agents learn some new information a realized agreement may no longer be in the private core Ž . value for the new information structure that arises. We define a ‘limit full information’ Ž . t economy and address the following issues; i Given a sequence x of approximate private Ž . core value allocations in each period, there is a subsequence that converges to a private Ž . ) Ž . Ž . core value x allocation for the limit full information economy. ii Private core value allocations x ) in the limit full information economy, can be approximated by a sequence t Ž . x of approximate private core value allocations in each time period. The approximate e notions we consider can be viewed as the errors that agents make due to bounded rationality. q 1999 Elsevier Science S.A. All rights reserved.