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Ambiguity and Rational Expectations Equilibria

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  • Scott Condie
  • Jayant V. Ganguli

Abstract

This paper demonstrates the existence and robustness of partially revealing rational expectations equilibria in general exchange economies when some traders have non-smooth ambiguity-averse preferences. This finding illustrates that models with non-smooth ambiguity aversion provide a relatively tractable framework through which partial information revelation may be studied in a general equilibrium setting without relying on particular distributional or von Neumann--Morgenstern utility assumptions or the presence of "noise." Copyright 2011, Oxford University Press.

Suggested Citation

  • Scott Condie & Jayant V. Ganguli, 2011. "Ambiguity and Rational Expectations Equilibria," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 821-845.
  • Handle: RePEc:oup:restud:v:78:y:2011:i:3:p:821-845
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    File URL: http://hdl.handle.net/10.1093/restud/rdq032
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    9. Han Ozsoylev & Jan Werner, 2011. "Liquidity and asset prices in rational expectations equilibrium with ambiguous information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 469-491, October.
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    Cited by:

    1. Nizar Allouch, 2013. "A competitive equilibrium for a warm-glow economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 269-282, May.
    2. Luciano I. de Castro & Marialaura Pesce & Nicholas C. Yannelis, 2013. "A New Perspective on Rational Expectations," The School of Economics Discussion Paper Series 1316, Economics, The University of Manchester.
    3. Illeditsch, PK & Ganguli, J & Condie, S, 2017. "Information Inertia (Working Paper)," Economics Discussion Papers 15615, University of Essex, Department of Economics.
    4. repec:esx:essedp:719 is not listed on IDEAS
    5. Chava, Sudheer & Gallmeyer, Michael & Park, Heungju, 2015. "Credit conditions and stock return predictability," Journal of Monetary Economics, Elsevier, vol. 74(C), pages 117-132.
    6. Huang, Helen Hui & Zhang, Shunming & Zhu, Wei, 2017. "Limited participation under ambiguity of correlation," Journal of Financial Markets, Elsevier, vol. 32(C), pages 97-143.
    7. Ganguli, J & Condie, S & Illeditsch, PK, 2012. "Information Inertia," Economics Discussion Papers 5628, University of Essex, Department of Economics.
    8. John Dickhaut & Radhika Lunawat & Kira Pronin & Jack Stecher, 2011. "Decision making and trade without probabilities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 275-288, October.
    9. repec:esx:essedp:770 is not listed on IDEAS
    10. : Kostas Koufopoulos & : Roman Kozhan, 2012. "Optimal Insurance under Advserse Selection and Ambiguity Aversion," Working Papers wpn12-07, Warwick Business School, Finance Group.
    11. Robert Nau, 2011. "Risk, ambiguity, and state-preference theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 437-467, October.
    12. Sebastián Cea-Echenique & Carlos Hervés-Beloso & Juan Pablo Torres-Martínez, 2017. "Endogenous differential information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 51-72, January.
    13. repec:oup:restud:v:82:y:2015:i:4:p:1533-1567. is not listed on IDEAS
    14. Michael Zierhut, 2016. "Partially revealing rational expectations equilibrium with real assets and binding constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(3), pages 495-516, August.
    15. repec:eee:jetheo:v:172:y:2017:i:c:p:512-557 is not listed on IDEAS
    16. 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.
    17. Ganguli, Jayant & Condie, Scott, 2012. "The pricing effects of ambiguous private information," Economics Discussion Papers 5631, University of Essex, Department of Economics.
    18. Luciano Castro & Marialaura Pesce & Nicholas Yannelis, 2011. "Core and equilibria under ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 519-548, October.
    19. Heyen, Daniel, 2014. "Learning under Ambiguity - A Note on the Belief Dynamics of Epstein and Schneider (2007)," Working Papers 0573, University of Heidelberg, Department of Economics.
    20. Kostas Koufopoulos & Roman Kozhan, 2016. "Optimal insurance under adverse selection and ambiguity aversion," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(4), pages 659-687, October.
    21. Jayant V. Ganguli & Scott Condie, 2009. "The dynamics of partially-revealing rational expectations equilibria," 2009 Meeting Papers 1122, Society for Economic Dynamics.
    22. Ellis, Andrew, 2016. "Condorcet meets Ellsberg," Theoretical Economics, Econometric Society, vol. 11(3), September.
    23. Eisei Ohtaki & Hiroyuki Ozaki, "undated". "Optimality in a Stochastic OLG Model with Ambiguity," Working Papers e69, Tokyo Center for Economic Research.
    24. repec:esx:essedp:720 is not listed on IDEAS
    25. Han Ozsoylev & Jan Werner, 2011. "Liquidity and asset prices in rational expectations equilibrium with ambiguous information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 469-491, October.

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