The complete removal of individual uncertainty: multiple optimal choices and random exchange economies
AbstractThe aim of this paper is to develop some measure-theoretic methods for the study of large economic systems with individual-specific randomness and multiple optimal actions. In particular, for a suitably formulated continuum of correspondences, an exact version of the law of large numbers in distribution is characterized in terms of almost independence, which leads to several other versions of the law of large numbers in terms of integration of correspondences. Widespread correlation due to multiple optimal actions is also shown to be removable via a redistribution. These results allow the complete removal of individual risks or uncertainty in economic models where non-unique best choices are inevitable. Applications are illustrated through establishing stochastic consistency in general equilibrium models with idiosyncratic shocks in endowments and preferences. In particular, the existence of "global" solutions preserving microscopic independence structure is shown in terms of competitive equilibria for the cases of divisible and indivisible goods as well as in terms of core for a case with indivisible goods where a competitive equilibrium may not exist. An important feature of the idealized equilibrium models considered here is that standard results on measure-theoretic economies are now directly applicable to the case of random economies. Some asymptotic interpretation of the results are also discussed. It is also pointed out that the usual unit interval [0,1] can be used as an index set in our setting, provided that it is endowed together with some sample space a suitable larger measure structure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 14 (1999)
Issue (Month): 3 ()
Note: Received: September 14, 1998; revised version: January 6, 1999
Contact details of provider:
Web page: http://link.springer.de/link/service/journals/00199/index.htm
Find related papers by JEL classification:
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- M. Ali Khan & Kali P. Rath & Yeneng Sun & Haomiao Yu, 2011. "On Large Games with a Bio-Social Typology," Economics Working Paper Archive 585, The Johns Hopkins University,Department of Economics.
- M Ali Khan, 2007. "Perfect Competition," Microeconomics Working Papers 22207, East Asian Bureau of Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If references are entirely missing, you can add them using this form.