Interactive Blocking in Arrow-Debreu Economies

Competitive behaviors such as outbidding one’s rivals may be countered by the rivals’ threat of mutually destructive objections. In an Arrow-Debreu model of production economies with firms privatized by property rights, we model such hindered competitive behaviors as a coalition’s attempt to block a status quo given the threat that the outsiders of the coalition, especially those with whom the coalition shares ownership of firms, may resort to production-ruining secession. We introduce new concepts of the core such that a coalition’s blocking plan is feasible only if it is not blocked by the outsiders with such secession. Based on such notions, we prove core equivalence theorems in the replication framework. ∗We thank Yi-Chun Chen, Eddie Dekel, Peter Streufert and Myrna Wooders for comments. †Department of Economics, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208, [email protected]. ‡Department of Economics, Iowa State University, 260 Heady Hall, Ames, IA 50011, [email protected], http://www.econ.iastate.edu/people/faculty/CV/669czheng.html.