The paper considers an exchange economy with incomplete information in which agents can retrade goods until all gains from trade are exhausted. Unimprovable allocations are defined to be those allocations from which agents would not wish to deviate either by retrading goods or by revealing further information. The concept of unimprovability is then used to analyze a lemons market and an adverse selection insurance market in which agents can renegotiate after information has been revealed. Finally, unimprovability is compared to different concepts of efficiency and to the concept of durability. Journal of Economic Literature Classification Number: D82.
ASJC Scopus subject areas
- Economics and Econometrics