A Characterization of the Core

Abstract

In this Chapter we analyse overlapping generations economies from a game theoretical point of view. Specifically, we shall characterize the core of a pure exchange overlapping generations economy. Since Samuelson’s [50] contribution overlapping generations models have been considered as a convenient framework for the analysis of a variety of social institutions which share the common characteristic of permitting intergenerational transfers. Examples of such institutions are fiat money, social security and public debt. By means of the working of these institutions the economy can reach Pareto optimal consumption allocations which would not be accessible with the standard institutional framework implicit in the Arrow-Debreu model. The problem we wish to study is whether these institutions are socially stable, i e. will not be refused by some agents.