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Ambiguity and Rational Expectations Equilibria

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  • Scott Condie
  • Jayant V. Ganguli

Abstract

This paper demonstrates the existence and robustness of partially revealing rational expectations equilibria in general exchange economies when some traders have non-smooth ambiguity-averse preferences. This finding illustrates that models with non-smooth ambiguity aversion provide a relatively tractable framework through which partial information revelation may be studied in a general equilibrium setting without relying on particular distributional or von Neumann--Morgenstern utility assumptions or the presence of "noise." Copyright 2011, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/restud/rdq032
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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 78 (2011)
Issue (Month): 3 ()
Pages: 821-845

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Handle: RePEc:oup:restud:v:78:y:2011:i:3:p:821-845

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  1. Rahi,Rohit, 1992. "Partially revealing rational expectations equilibria with nominal assets," Discussion Paper Serie A 387, University of Bonn, Germany.
  2. Rigotti, Luca & Shannon, Chris, 2012. "Sharing risk and ambiguity," Journal of Economic Theory, Elsevier, vol. 147(5), pages 2028-2039.
  3. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, September.
  4. Tallon, Jean-Marc, 1998. "Asymmetric Information, Nonadditive Expected Utility, and the Information Revealed by Prices: An Example," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 329-42, May.
  5. Han Ozsoylev & Jan Werner, 2011. "Liquidity and asset prices in rational expectations equilibrium with ambiguous information," Economic Theory, Springer, vol. 48(2), pages 469-491, October.
  6. Pietra, Tito & Siconolfi, Paolo, 1997. "Extrinsic Uncertainty and the Informational Role of Prices," Journal of Economic Theory, Elsevier, vol. 77(1), pages 154-180, November.
  7. Polemarchakis, H M & Siconolfi, P, 1993. "Asset Markets and the Information Revealed by Prices," Economic Theory, Springer, vol. 3(4), pages 645-61, October.
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Cited by:
  1. Nizar Allouch, 2009. "A Competitive Equilibrium for a Warm Glow Economy," Working Papers 641, Queen Mary, University of London, School of Economics and Finance.
  2. Jayant Ganguli & Scott Condie, 2012. "The pricing effects of ambiguous private information," Economics Discussion Papers 720, University of Essex, Department of Economics.
  3. Scott Condie & Jayant Ganguli, 2011. "Informational efficiency with ambiguous information," Economic Theory, Springer, vol. 48(2), pages 229-242, October.
  4. Luciano De Castro & Marialaura Pesce & Nicolas Yannelis, 2011. "Core and Equilibria under ambiguity," Discussion Papers 1534, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. : Kostas Koufopoulos & : Roman Kozhan, 2012. "Optimal Insurance under Advserse Selection and Ambiguity Aversion," Working Papers wpn12-07, Warwick Business School, Finance Group.
  6. Jayant V. Ganguli & Scott Condie, 2009. "The dynamics of partially-revealing rational expectations equilibria," 2009 Meeting Papers 1122, Society for Economic Dynamics.
  7. Jayant Ganguli & Scott Condie & Philipp Karl Illeditsch, 2012. "Information Inertia," Economics Discussion Papers 719, University of Essex, Department of Economics.
  8. John Dickhaut & Radhika Lunawat & Kira Pronin & Jack Stecher, 2011. "Decision making and trade without probabilities," Economic Theory, Springer, vol. 48(2), pages 275-288, October.
  9. Robert Nau, 2011. "Risk, ambiguity, and state-preference theory," Economic Theory, Springer, vol. 48(2), pages 437-467, October.
  10. Han Ozsoylev & Jan Werner, 2011. "Liquidity and asset prices in rational expectations equilibrium with ambiguous information," Economic Theory, Springer, vol. 48(2), pages 469-491, October.

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