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Interim Efficient Allocations under Uncertainty

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  • Atsushi Kajii

    ()
    (Institute of Economic Research, Kyoto University)

  • Takashi Ui

    ()
    (Yokohama National University)

Abstract

This paper considers an exchange economy under uncertainty with asymmetric information. Uncertainty is represented by multiple priors and posteriors of agents who have either Bewley's incomplete preferences or Gilboa-Schmeidler's maximin expected utility preferences. The main results characterize interim efficient allocations under uncertainty; that is, they provide conditions on the sets of posteriors, thus implicitly on the way how agents update the sets of priors, for non-existence of a trade which makes all agents better off at any realization of private information. For agents with the incomplete preferences, the condition is necessary and sufficient, but for agents with the maximin expected utility preferences, the condition is sufficient only. A couple of necessary conditions for the latter case are provided.

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Bibliographic Info

Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 642.

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Length: 23pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:kyo:wpaper:642

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Keywords: multiple priors; interim efficiency; no trade; dynamic consistency; rectangular prior set;

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References

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Cited by:
  1. Martins-da-Rocha, Victor Filipe, 2009. "Interim efficiency with MEU-preferences," Economics Working Papers (Ensaios Economicos da EPGE) 696, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  2. Dana, R.A. & Le Van, C., 2010. "Overlapping risk adjusted sets of priors and the existence of efficient allocations and equilibria with short-selling," Journal of Economic Theory, Elsevier, Elsevier, vol. 145(6), pages 2186-2202, November.
  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.
  4. : 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.
  5. Rigotti, Luca & Shannon, Chris, 2012. "Sharing risk and ambiguity," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(5), pages 2028-2039.

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