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Undescribable Events

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Author Info
Nabil I. Al-Najjar ()
Luca Anderlini ()
Leonardo Felli ()

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Abstract

We develop a model of undescribable events. Examples of events that are well understood by economic agents but are prohibitively difficult to describe in advance abound in real-life. This notion has also pervaded a substantial amount of economic literature. We put forth a model of such events using a simple co-insurance problem as backdrop. Undescribable events in our model are understood by economic agents - their consequences and probabilities are known - but are such that every finite description of such events necessarily leaves out relevant features that have a non-negligible impact on the parties' expected utilities. We also show that two key ingredients of our model - probabilities that are finitely additive but fail countable additivity, and a state space that is small (discrete in our model) in a measure-theoretic sense -are necessary ingredients of any model of undescribable events that delivers our results.

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File URL: http://www.cesifo-group.de/DocCIDL/cesifo1_wp1092.pdf
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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1092.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1092

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Related research
Keywords: undescribable events; incomplete contracts; finite invariance; fine variability;

Other versions of this item:

Find related papers by JEL classification:
C69 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Other
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other

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  1. Kumabe, Masahiro & Mihara, H. Reiju, 2007. "Computability of simple games: A complete investigation of the sixty-four possibilities," MPRA Paper 440, University Library of Munich, Germany. [Downloadable!]
  2. Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2001. "Courts of Law and Unforeseen Contingencies," PIER Working Paper Archive 06-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Jan 2006. [Downloadable!]
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