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Sharing risk and ambiguity

Author

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  • Rigotti, Luca
  • Shannon, Chris

Abstract

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.

Suggested Citation

  • Rigotti, Luca & Shannon, Chris, 2012. "Sharing risk and ambiguity," Journal of Economic Theory, Elsevier, vol. 147(5), pages 2028-2039.
    • Handle: RePEc:eee:jetheo:v:147:y:2012:i:5:p:2028-2039
    DOI: 10.1016/j.jet.2012.05.009
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Boonen, Tim J. & Jiang, Wenjun, 2022. "Bilateral risk sharing in a comonotone market with rank-dependent utilities," Insurance: Mathematics and Economics, Elsevier, vol. 107(C), pages 361-378.
    2. Biheng, Noé & Bonnisseau, Jean-Marc, 2015. "Regular economies with ambiguity aversion," Journal of Mathematical Economics, Elsevier, vol. 59(C), pages 24-36.
    3. Antoine Billot & Sujoy Mukerji & Jean-Marc Tallon, 2020. "Market Allocations under Ambiguity: A Survey," Revue économique, Presses de Sciences-Po, vol. 71(2), pages 267-282.
    4. Araujo, Aloisio & Chateauneuf, Alain & Faro, José Heleno, 2018. "Financial market structures revealed by pricing rules: Efficient complete markets are prevalent," Journal of Economic Theory, Elsevier, vol. 173(C), pages 257-288.
    5. Le Van, Cuong & Navrouzoglou, Paulina & Vailakis, Yiannis, 2019. "On endogenous formation of price expectations," Games and Economic Behavior, Elsevier, vol. 115(C), pages 436-458.
    6. Matthias Lang, 2017. "First-Order and Second-Order Ambiguity Aversion," Management Science, INFORMS, vol. 63(4), pages 1254-1269, April.
    7. Eisei Ohtaki, 2023. "Optimality in an OLG model with nonsmooth preferences," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 611-659, September.
    8. Beißner, Patrick, 2016. "Radner Equilibria under Ambiguous Volatility," Center for Mathematical Economics Working Papers 493, Center for Mathematical Economics, Bielefeld University.
    9. Luciano Castro & Alain Chateauneuf, 2011. "Ambiguity aversion and trade," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 243-273, October.
    10. Eisei Ohtaki & Hiroyuki Ozaki, 2015. "Monetary equilibria and Knightian uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 435-459, August.
    11. Eisei Ohtaki & Hiroyuki Ozaki, 2014. "Optimality in a Stochastic OLG Model with Ambiguity," Working Papers e069, Tokyo Center for Economic Research.
    12. Chakravarty, Surajeet & Kelsey, David, 2015. "Sharing ambiguous risks," Journal of Mathematical Economics, Elsevier, vol. 56(C), pages 1-8.
    13. Eisei Ohtaki, 2016. "Optimality of the Friedman rule under ambiguity," Working Papers e103, Tokyo Center for Economic Research.
    14. Mihm, Maximilian, 2016. "Reference dependent ambiguity," Journal of Economic Theory, Elsevier, vol. 163(C), pages 495-524.
    15. Scott Condie & Jayant Ganguli, 2011. "Informational efficiency with ambiguous information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 229-242, October.
    16. Tian, Dejian & Tian, Weidong, 2014. "Optimal risk-sharing under mutually singular beliefs," Mathematical Social Sciences, Elsevier, vol. 72(C), pages 41-49.
    17. ,, 2013. "Endogenous indeterminacy and volatility of asset prices under ambiguity," Theoretical Economics, Econometric Society, vol. 8(3), September.
    18. Galanis, Spyros, 2018. "Financial complexity and trade," Games and Economic Behavior, Elsevier, vol. 112(C), pages 219-230.

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    More about this item

    Keywords

    Ambiguity; General equilibrium theory; Financial markets; Determinacy of equilibria; Variational preferences; Multiple priors;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G1 - Financial Economics - - General Financial Markets

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