Brownian equilibria under Knightian uncertainty
AbstractThis paper establishes, in the setting of Brownian information, a general equilibrium existence result in a heterogeneous agent economy. The existence is generic among income distributions. Agents differ moreover in their stochastic differential formulation of intertemporal recursive utility. The present class of utility functionals is generated by a recursive integral equation and incorporates preference for the local risk of the stochastic utility process. The setting contains models in which Knightian uncertainty is represented in terms of maxmin preferences of Chen and Epstein (2002). Alternatively, Knightian decision making in terms of an inertia formulation from Bewley (2002) can be modeled as well.
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Bibliographic InfoPaper provided by Bielefeld University, Center for Mathematical Economics in its series Working Papers with number 447.
Length: 20 pages
Date of creation: Nov 2013
Date of revision:
generalized stochastic differential utility; super-gradients; properness; general equilibrium; Knightian uncertainty; generic existence; asset pricing;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-23 (All new papers)
- NEP-DGE-2011-04-23 (Dynamic General Equilibrium)
- NEP-ORE-2011-04-23 (Operations Research)
- NEP-UPT-2011-04-23 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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