Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/201622
Authors: 
Beißner, Patrick
Riedel, Frank
Year of Publication: 
2018
Series/Report no.: 
Center for Mathematical Economics Working Papers 597
Abstract: 
We study economies in which agents face Knightian uncertainty about state prices. Knightian uncertainty leads naturally to nonlinear expectations. We introduce a corresponding equilibrium concept with sublinear prices and prove that equilibria exist under weak conditions. In general, such equilibria lead to Pareto inefficient allocations; the equilibria coincide with Arrow-Debreu equilibria only if the values of net trades are ambiguity-free in the mean. In economies without aggregate uncertainty, inefficiencies are generic. We introduce a constrained efficiency concept, uncertainty-neutral efficiency; equilibrium allocations under price uncertainty are efficient in this constrained sense. Arrow-Debreu equilibria turn out to be non-robust with respect to the introduction of Knightian uncertainty.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.