Bounded rational learning in differential information economies: core and value

We apply the private core and the private value to a dynamic economy and st udy the evolution of private core and private value allocations as individu als acquire information (learn) through time. In particular, a realized agr eement in each period generates information that changes the underlying inf ormation structure in the economy. Since the private core (value) depends o n the distribution of information across individuals, when agents learn som e new information a realized agreement may no longer be in the private core (value) for the new information structure that arises. We define a 'limit full information economy and address the following issues; (i) Given a sequ ence x' of approximate private core (value) allocations in each period, the re is a subsequence that converges to a private core (value) x* allocation for the limit full information economy. (ii) Private core (value) allocatio ns x* in the limit full information economy, can be approximated by a seque nce x(e)' of approximate private core (value) allocations in each time peri od. The approximate notions we consider can be viewed as the errors that ag ents make due to bounded rationality. (C) 1999 Elsevier Science S.A. All ri ghts reserved.