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Prudent expectations equilibrium in economies with uncertain delivery

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  • João Correia-da-Silva

    ()

  • Carlos Hervés-Beloso

    ()

Abstract

In an economy with private information, we introduce the notion of objects of choice as lists of bundles out of which the market selects one for delivery. This leads to an extension of the model of Arrow-Debreu that is used to study ex-ante trade with private state verification. The model does not require agents to have complete information about the space of states, being suited to a context of Knightian uncertainty. Under the assumption that agents are prudent, equilibrium is characterized by the fact that agents consume bundles with the same utility in states that they do not distinguish.
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Suggested Citation

  • João Correia-da-Silva & Carlos Hervés-Beloso, 2009. "Prudent expectations equilibrium in economies with uncertain delivery," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(1), pages 67-92, April.
  • Handle: RePEc:spr:joecth:v:39:y:2009:i:1:p:67-92
    DOI: 10.1007/s00199-007-0316-6
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    References listed on IDEAS

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    More about this item

    Keywords

    General equilibrium; Private information; Radner equilibrium; Differential information; Incomplete information; Knightian uncertainty; Ambiguity; Incomplete contracts; Uncertain delivery; Lists of bundles; C62; D51; D82;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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