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Prudent expectations equilibrium in economies with uncertain delivery

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  • João Correia-da-Silva

    ()

  • Carlos Hervés-Beloso

    ()

Abstract

In an economy with private information, we introduce the notion of objects of choice as lists of bundles out of which the market selects one for delivery. This leads to an extension of the model of Arrow-Debreu that is used to study ex-ante trade with private state verification. The model does not require agents to have complete information about the space of states, being suited to a context of Knightian uncertainty. Under the assumption that agents are prudent, equilibrium is characterized by the fact that agents consume bundles with the same utility in states that they do not distinguish.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 39 (2009)
Issue (Month): 1 (April)
Pages: 67-92

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Handle: RePEc:spr:joecth:v:39:y:2009:i:1:p:67-92

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Related research

Keywords: General equilibrium; Private information; Radner equilibrium; Differential information; Incomplete information; Knightian uncertainty; Ambiguity; Incomplete contracts; Uncertain delivery; Lists of bundles; C62; D51; D82;

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References

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  1. Forges, Francoise & Minelli, Enrico & Vohra, Rajiv, 2002. "Incentives and the core of an exchange economy: a survey," Journal of Mathematical Economics, Elsevier, vol. 38(1-2), pages 1-41, September.
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  10. Prescott, Edward C & Townsend, Robert M, 1984. "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, Econometric Society, vol. 52(1), pages 21-45, January.
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  12. Repullo, Rafael, 1985. "On the non-existence of equilibrium with differential information," Economics Letters, Elsevier, vol. 18(2-3), pages 105-108.
  13. Joao Correia-da-Silva & Carlos Hervés-Beloso, 2006. "Rational Expectations Equilibrium in Economies with Uncertain Delivery," FEP Working Papers 206, Universidade do Porto, Faculdade de Economia do Porto.
  14. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  15. Angeloni, Laura & Martins-da-Rocha, Victor Filipe, 2007. "Contract enforcement and incentive compatibility in large economies with differential information: the role of exact feasibility," Economics Working Papers (Ensaios Economicos da EPGE) 647, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  16. Guangsug Hahn & Nicholas C. Yannelis, 1997. "Efficiency and incentive compatibility in differential information economies," Economic Theory, Springer, vol. 10(3), pages 383-411.
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  19. Wilson, Robert B, 1978. "Information, Efficiency, and the Core of an Economy," Econometrica, Econometric Society, vol. 46(4), pages 807-16, July.
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