Stable Contractual Allocations, Equilibria and Core in Incomplete Markets

The paper presents and studies a new concept of coalition domination for incomplete markets. It was elaborated applying a contractual approach and based on the notion of fuzzy contractual allocation, see Marakulin (2011, 2013). Core allocations are implemented by the net trades (webs of contracts) having the following kind of stability. There is no coalition which is able to dominate allocation doing so: (i) in the present it breaks off all contracts in all states of nature and conclude a family of ineffective contracts in the future and a (profitable) new contract in the present or (ii) in future, in each given state of the world, contracts are broken partially and asymmetrically, after that a new contract is concluded. Requirement (i) can be treated as the impossibility to compensate for the signing of ineffective contracts in the future by concluding a new contract in the present. Also, GEI-equilibrium is described as (ii) applied to all states of the world. This core converts into a classical one when the market turns complete. Under perfect competition conditions, core allocations are GEI-equilibria. These properties prove the validity of the suggested core.