Mass-Economies with Vital Small Coalitions; the F-Core Approach

A mass-economy is one with many, many agents where each agent is negligible and each trading group is also negligible with respect to the mass-economy. Feasible allocations are those which are virtually attainable by trades only among members of coalitions contained in feasible ("measure-consistent") partitions of the agent set. A feasible allocation is in the core, called the f-core, if it cannot be improved upon by any finite coalition. We show that in a private goods economy with indivisibilities and without externalities, the f-core, the A-core (Aumann's core concept) and the Walrasian allocations coincide. In the presence of widespread externalities, the f-core and the Walrasian allocations coincide but the definition of the A-core is problematic. The conceptual significance of these results will be discussed.