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http://hdl.handle.net/10419/43834
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| Title: | | Intertemporal equilibria with knightian uncertainty  |
| Authors: | | Dana, Rose-Anne Riedel, Frank |
| Issue Date: | | 2010 |
| Series/Report no.: | | Working papers // Institute of Mathematical Economics 440 |
| Abstract: | | We study a dynamic and infinite-dimensional model with Knightian uncertainty modeled by incomplete multiple prior preferences. In interior efficient allocations, agents share a common risk-adjusted prior and use the same subjective interest rate. Interior efficient allocations and equilibria coincide with those of economies with subjective expected utility and priors from the agents' multiple prior sets. We show that the set of equilibria with inertia contains the equilibria of the economy with variational preferences anchored at the initial endowments. A case study in an economy without aggregate uncertainty shows that risk is fully insured, while uncertainty can remain fully uninsured. Pessimistic agents with Gilboa-Schmeidler's max-min preferences would fully insure risk and uncertainty. |
| Subjects: | | Knightian Uncertainty Ambiguity Incomplete Preferences General Equilibrium Theory No Trade |
| JEL: | | D51 D81 D91 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Papers, Institute of Mathematical Economics, Universität Bielefeld
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