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Ambiguity Aversion and the Absence of Wage Indexation Author info | Abstract | Publisher info | Download info | Related research | Statistics Sujoy Mukerji
Jean-Marc Tallon
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This paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their wage contracts even when inflation is uncertain, unless the perceived inflation uncertainty is high enough. Significantly, the exercise does not presume any exogenous costs (e.g. transactions costs) of including indexation links.
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number
111.
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Date of creation: 2002Date of revision:
Handle: RePEc:oxf:wpaper:111Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ Email: Web page: http://www.economics.ox.ac.uk/ More information through EDIRC
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Keywords: wage contracts ; indexation ; inflation ; uncertainty ; Other versions of this item:
Find related papers by JEL classification: D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
References listed on IDEAS 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.:
Hansen, Lars Peter & Sargent, Thomas J & Tallarini, Thomas D, Jr, 1999.
"Robust Permanent Income and Pricing ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 66(4), pages 873-907, October.
[Downloadable!] (restricted)
Other versions: Sujoy Mukerji & Jean-Marc Tallon, 2001.
"Ambiguity Aversion and Incompleteness of Financial Markets ,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
halshs-00174539_v1, HAL.
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Other versions:
Mukerji, S. & Tallon, J.-M., 1999.
"Ambiguity Aversion and Incompleteness of Financial Markets ,"
Papiers d'Economie Mathématique et Applications
1999-28, Université Panthéon-Sorbonne (Paris 1).
Sujoy Mukerji & Jean-Marc Tallon, 2000.
"Ambiguity Aversion and Incompleteness of Financial Markets ,"
Economics Series Working Papers
046, University of Oxford, Department of Economics.
[Downloadable!] Mukerji, Sujoy & Tallon, Jean-Marc, 2001.
"Ambiguity Aversion and Incompleteness of Financial Markets ,"
Review of Economic Studies ,
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Mukerji, S. & Tallon, J.-M., 2000.
"Ambiguity Aversion and the Absence of Indexed Debt ,"
Economics Series Working Papers
9928, University of Oxford, Department of Economics.
Other versions:
Sujoy Mukerji & Jean-Marc Tallon, 2000.
"Ambiguity Aversion and the Absence of Indexed Debt ,"
Economics Series Working Papers
028, University of Oxford, Department of Economics.
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Papiers d'Economie Mathématique et Applications
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"Asymmetric Information, Nonadditive Expected Utility, and the Information Revealed by Prices: An Example ,"
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Epstein, Larry G & Wang, Tan, 1994.
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Schmeidler, David, 1989.
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references Cited by : (explanations , 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.)
Fujikawa, Takemi, 2009.
"The hot stove effect in repeated-play decision making under ambiguity ,"
MPRA Paper
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Dirk Hackbarth & Jianjun Maio, 2007.
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Boston University - Department of Economics - Working Papers Series
WP2007-017, Boston University - Department of Economics.
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Shin-ichi Fukuda, 2008.
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Review of Economic Dynamics ,
Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 652-663, July.
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Other versions: Jianjun Miao, 2004.
"Risk, uncertainty and option exercise ,"
Finance
0410013, EconWPA.
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Jianjun Miao & Neng Wang, 2007.
"Risk, Uncertainty, and Option Exercise ,"
Boston University - Department of Economics - Working Papers Series
WP2007-016, Boston University - Department of Economics.
[Downloadable!] Jianjun Miao & Neng Wang, 2004.
"Risk, Uncertainty, and Option Exercise ,"
Boston University - Department of Economics - The Institute for Economic Development Working Papers Series
dp-136, Boston University - Department of Economics.
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