Decentralization for the Core of Non‐Convex Economies With Externalities

ABSTRACT

We study pure exchange economies with consumption externalities, where agents' preferences depend on others' consumption and may be non‐convex. Adopting a cooperative approach, we allow agents to form coalitions and introduce a notion of generalized fuzzy core. We show that core allocations can be decentralized via suitable price systems. We establish a core equivalence theorem for A‐equilibria , which generalizes Walras‐Nash and Berge equilibria with externalities. We also prove a corresponding equivalence result for economies with Arrowian markets, where generalized fuzzy core allocations can be supported as Information equilibria with personalized and market prices.