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Interim efficiency with MEU-preferences

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  • Martins-da-Rocha, Victor Filipe

Abstract

Recently Kajii and (2008) proposed to characterize interim efficient allocations in an exchange economy under asymmetric information when uncertainty is represented by multiple posteriors.When agents have Bewley's incomplete preferences, Kajii and Ui (2008) proposed a necessary and sufficient condition on the set of posteriors.However, when agents have Gilboa--Schmeidler's MaxMin expected utility preferences, they only propose a sufficient condition.The objective of this paper is to complete Kajii and Ui's work by proposing a necessary and sufficient condition for interim efficiency for various models of ambiguity aversion and in particular MaxMin expected utility.Our proof is based on a direct application of some results proposed by Rigotti, Shannon and Stralecki (2008).

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 696.

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Date of creation: 14 Jul 2009
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Handle: RePEc:fgv:epgewp:696

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  1. Antoine Billot & Alain Chateauneuf & Itzhak Gilboa & Jean-Marc Tallon, 2000. "Sharing Beliefs: Between Agreeing and Disagreeing," Econometrica, Econometric Society, Econometric Society, vol. 68(3), pages 685-694, May.
  2. Klibanoff, Peter & Hanany, Eran, 2007. "Updating preferences with multiple priors," Theoretical Economics, Econometric Society, Econometric Society, vol. 2(3), September.
  3. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Carlo Alberto Notebooks, Collegio Carlo Alberto 12, Collegio Carlo Alberto, revised 2006.
  4. Ergin, Haluk & Gul, Faruk, 2009. "A theory of subjective compound lotteries," Journal of Economic Theory, Elsevier, Elsevier, vol. 144(3), pages 899-929, May.
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  6. Rigotti, Luca & Shannon, Chris, 2001. "Uncertainty and Risk in Financial Markets," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt7pp7113z, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, Elsevier, vol. 26(1), pages 17-27, February.
  8. Shannon, Chris & Strzalecki, Tomasz & Rigotti, Luca, 2008. "Subjective Beliefs and Ex Ante Trade," Scholarly Articles, Harvard University Department of Economics 3637104, Harvard University Department of Economics.
  9. Thomas J. Sargent & LarsPeter Hansen, 2001. "Robust Control and Model Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 60-66, May.
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  12. Tallon, Jean-Marc, 1998. "Do sunspots matter when agents are Choquet-expected-utility maximizers?," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 22(3), pages 357-368, March.
  13. Dana, Rose-Anne, 2002. "On Equilibria when Agents Have Multiple Priors," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/5456, Paris Dauphine University.
  14. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2002. "A smooth model of decision making under ambiguity," ICER Working Papers - Applied Mathematics Series, ICER - International Centre for Economic Research 11-2003, ICER - International Centre for Economic Research, revised Apr 2003.
  15. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 18(2), pages 141-153, April.
  16. Dov Samet, 1997. "Common Priors and Separation of Convex Sets," Game Theory and Information, EconWPA 9701002, EconWPA.
  17. Dana, Rose-Anne, 2004. "Ambiguity, uncertainty aversion and equilibrium welfare," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/5393, Paris Dauphine University.
  18. Rose-Anne Dana, 2004. "Ambiguity, uncertainty aversion and equilibrium welfare," Economic Theory, Springer, Springer, vol. 23(3), pages 569-587, March.
  19. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, Econometric Society, vol. 57(3), pages 571-87, May.
  20. Morris, Stephen, 1994. "Trade with Heterogeneous Prior Beliefs and Asymmetric Information," Econometrica, Econometric Society, Econometric Society, vol. 62(6), pages 1327-47, November.
  21. Robert F. Nau, 2006. "Uncertainty Aversion with Second-Order Utilities and Probabilities," Management Science, INFORMS, INFORMS, vol. 52(1), pages 136-145, January.
  22. Atsushi Kajii & Takashi Ui, 2007. "Interim Efficient Allocations under Uncertainty," KIER Working Papers, Kyoto University, Institute of Economic Research 642, Kyoto University, Institute of Economic Research.
  23. Chateauneuf, Alain & Faro, José Heleno, 2009. "Ambiguity through confidence functions," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 45(9-10), pages 535-558, September.
  24. Wilson, Robert B, 1978. "Information, Efficiency, and the Core of an Economy," Econometrica, Econometric Society, Econometric Society, vol. 46(4), pages 807-16, July.
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Cited by:
  1. Strzalecki, Tomasz & Werner, Jan, 2011. "Efficient Allocations under Ambiguity," Scholarly Articles, Harvard University Department of Economics 11352637, Harvard University Department of Economics.
  2. : Kostas Koufopoulos & : Roman Kozhan, 2012. "Optimal Insurance under Advserse Selection and Ambiguity Aversion," Working Papers, Warwick Business School, Finance Group wpn12-07, Warwick Business School, Finance Group.
  3. Nabil I. Al-Najjar & Luciano De Castro, 2010. "Uncertainty, Efficiency and Incentive Compatibility," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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