General equilibrium, a corner stone of economic theory, has been from the beginning an essential part of CORE’s
research in economics. Beyond contributing to the deepening its fundamentals on large competitive economies and their equilibria
, developments have been achieved in several directions: uncertainty, incomplete markets, non-convexities in the production sector, introduction of money. A special focus is on the topic of coordination failures leading to price equilibria
with rationing in quantities, a theory intended to provide equilibrium
foundations to unemployment phenomena.
Against this unifying background of general equilibrium, research at CORE has developed in several other fields of economic theory. In industrial economics, theoretical extensions have been achieved on product differentiation, imperfect competition, market
entry decisions. In spatial economics new concepts have been offered on location decisions, regional development and location externalities. In individual and collective decision theory, the foundations of expected utility theory have been conceptually enriched, and the notion of Bayesian incentive compatibility has been introduced. Public economics has been developed in several directions: management of public enterprises, measurement of productive efficiency, redistributive taxation and fiscal competition, as well as international
cooperation on global environmental issues (which has led to the creation at CORE of the Lhoist Berghmans
chair in environmental economics) and decentralized resource allocation processes for economies with public goods. A related development is political economics with researches in abstract voting theory and on the decentralization of political decision making.
Parallel to general equilibrium, game theory plays a no less unifying role in CORE’s
research agenda. The work here consists first of developments of the theory in itself, both in its non-cooperative and cooperative aspects (new equilibrium concepts as well as new properties of classical cooperative solutions, introduction of uncertainty). Second, the work consists in instiling
game theoretical concepts and results (e.g. Nash equilibria
and the core) in several of the economic fields mentioned above.
Current research areas
Research in Economic Theory at CORE focuses on four main topics:
- Industrial Economics
- Product differentiation: Models of discrete choices; Applications to international trade and economic integration; Imperfect competitive markets with heterogeneous workers; Economic geography models.
- R&D and innovation: Cooperation and competition in R&D; Knowledge and skill acquisition by teams and individuals; Informational spillovers in industrial districts; R&D and market structure.
- Mergers, cartels and endogenous coalition formation in industrial change.
- Regulation of oligopolistic markets: Networks and public utilities; Natural oligopolies; Mixed oligopoly; Pricing schemes; Effects of taxation on industry behavior; Computation of equilibria for oligopolistic industries; Antitrust policy.
- Regional policy: Competition and agglomeration; Trade and regional issues.
- Public and Environmental Economics
- Optimal fiscal policies and limits to redistribution: International tax competition with mobile factors; Fiscal federalism and regional decentralization.
- Economics of social security and pension systems: Pay as-you-go schemes, Pensions in Belgium and Europe, Public finance.
- Political Economy: Lobbying, and voting behavior and their effects on various aspects of economic allocation; Regional issues and political factors.
- Efficiency in the public sector: Methodological and applied issues in the measurement of performance; Incentives for public firms and services; Financing schemes for hospitals and physicians; Assessment of academic output and performance in Europe and worldwide.
- Environmental economics: Transfrontier pollution and international negociations; Theory and simulation of economico-ecological models; Choice of economic instruments in environmental policy; Endogenous coalition formation; Cost-benefit analysis.
- Game Theory and Social Choice
- Topics in game theory: Equilibrium refinements and selection; Games of incomplete information; Dynamic and stochastic games; Cooperative games and coalition formation, Supermodular games and their economic applications.
- Mechanism design: Incentives in collective decision-making; Auction theory; Design of economic and political institutions.
- Social choice and welfare: Foundations of utilitarianism; Bargaining and sharing rules; Axiomatics of allocation mechanisms; Intergenerational equity.
- Economic foundations for the objectives of the firm.
- General Equilibrium Analysis
- The theory of incomplete markets: The role of money and monetary policy when asset markets are incomplete; General equilibrium with asymmetric information; Uncertainty and insurance in equilibrium models.
- Imperfect competition in general equilibrium with agents having market power: Equilibrium concepts with various feedback effects; Strategic market games; Existence of equilibria; Computation of general equilibria.
- Overlapping generation models: Existence and stability of dynamic equilibria; Macroeconomic fluctuations; Theoretical foundations of unemployment and macroeconomic policies.