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Sharing risk and ambiguity

  • Rigotti, Luca
  • Shannon, Chris

We study the market implications of ambiguity in common models. We show that generic determinacy is a robust feature in general equilibrium models that allow a distinction between ambiguity and risk.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 147 (2012)
Issue (Month): 5 ()
Pages: 2028-2039

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Handle: RePEc:eee:jetheo:v:147:y:2012:i:5:p:2028-2039
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  1. Lars Peter Hansen & Thomas J. Sargent & Thomas D. Tallarini, 1999. "Robust Permanent Income and Pricing," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 873-907.
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  5. Simone Cerreia-Vioglio, 2011. "Objective Rationality and Uncertainty Averse Preferences," Working Papers 413, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Tallon, Jean-Marc, 1998. "Asymmetric Information, Nonadditive Expected Utility, and the Information Revealed by Prices: An Example," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 329-42, May.
  7. Rose-Anne Dana, 2004. "Ambiguity, uncertainty aversion and equilibrium welfare," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(3), pages 569-587, March.
  8. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Levine's Working Paper Archive 786969000000000126, David K. Levine.
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  10. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-92, May.
  11. Sujoy Mukerji & Jean-Marc Tallon, 2001. "Ambiguity Aversion and Incompleteness of Financial Markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00174539, HAL.
  12. Robert F. Nau, 2006. "Uncertainty Aversion with Second-Order Utilities and Probabilities," Management Science, INFORMS, vol. 52(1), pages 136-145, January.
  13. Cerreia-Vioglio, S. & Maccheroni, F. & Marinacci, M. & Montrucchio, L., 2011. "Uncertainty averse preferences," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1275-1330, July.
  14. Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March.
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  16. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702, November.
  17. Rigotti, Luca & Shannon, Chris, 2001. "Uncertainty and Risk in Financial Markets," Department of Economics, Working Paper Series qt6m42r5rr, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  18. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
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  21. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  22. Larry G. Epstein, 2001. "Sharing Ambiguity," American Economic Review, American Economic Association, vol. 91(2), pages 45-50, May.
  23. Rose-Anne Dana, 2002. "On Equilibria when Agents Have Multiple Priors," Annals of Operations Research, Springer, vol. 114(1), pages 105-115, August.
  24. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2002. "A smooth model of decision making under ambiguity," ICER Working Papers - Applied Mathematics Series 11-2003, ICER - International Centre for Economic Research, revised Apr 2003.
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  26. Shannon, Chris, 1994. "Regular nonsmooth equations," Journal of Mathematical Economics, Elsevier, vol. 23(2), pages 147-165, March.
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  29. Dow, James & Werlang, Sergio Ribeiro da Costa, 1992. "Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio," Econometrica, Econometric Society, vol. 60(1), pages 197-204, January.
  30. Easley, David & O'Hara, Maureen, 2010. "Liquidity and valuation in an uncertain world," Journal of Financial Economics, Elsevier, vol. 97(1), pages 1-11, July.
  31. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, Oxford University Press, vol. 75(4), pages 643-669.
  32. Pascal J. Maenhout, 2004. "Robust Portfolio Rules and Asset Pricing," Review of Financial Studies, Society for Financial Studies, vol. 17(4), pages 951-983.
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