The Recursive Core

An allocation in an infinite horizon capital accumulation model is a recursive core allocation provided no coalition can improve upon its consumption stream at any time given its accumulation of assets up to that period. The authors show for every allocation of consumption in the initial core, one can find a distribution of capital stocks among the agents where no coalition of agents will break the initial core contract at any date. The recursive core links the distribution of capital, the problem of trust in the sense of D. Gale, and time consistent intertemporal contracts. Copyright 1995 by The Econometric Society.

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