THE VALUE ALLOCATION OF AN ECONOMY WITH DIFFERENTIAL INFORMATION

We analyze the Shapley value allocation of an economy with differentia l information. Since the intent of the Shapley value is to measure the sum of the expected marginal contributions made by an agent to any co alition to which he/she belongs, the value allocation of an economy wi th differential information provides an interesting way to measure the information advantage of an agent. This feature of the Shapley value allocation is not necessarily shared by the rational expectation equil ibrium. Thus, we analyze the informational structure of an economy wit h differential information from a different and new viewpoint. In part icular we address the following questions: How do coalitions of agents share their private information? How can one measure the information advantage or superiority of an agent? Is each agent's private informat ion verifiable by other members of a coalition? Do coalitions of agent s pool their private information? Do agents have an incentive to repor t their true private information? What is the correct concept of a val ue allocation in an economy with differential information? Do value al locations exist in an economy with differential information? We provid e answers to each of these questions.