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Value allocation under ambiguity

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  • Angelos Angelopoulos
  • Leonidas Koutsougeras

Abstract

We consider a pure exchange economy with asymmetric information where individual behavior exhibits ambiguity aversion along the line of maximin expected utility decision making. For such economies, we introduce different notions of maximin value allocations. We also introduce a strong notion of incentive compatibility. We prove the existence and incentive compatibility of the maximin value allocation. We conclude that unlike the Bayesian value allocation approach in Krasa Yannelis (Econometrica 62(4):881–900, 1994 ), incentive compatibility is related to efficiency rather than to direct exchange of information. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Angelos Angelopoulos & Leonidas Koutsougeras, 2015. "Value allocation under ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(1), pages 147-167, May.
    • Handle: RePEc:spr:joecth:v:59:y:2015:i:1:p:147-167
    DOI: 10.1007/s00199-014-0812-4
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    References listed on IDEAS

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    15. Koutsougeras, Leonidas C & Yannelis, Nicholas C, 1993. "Incentive Compatibility and Information Superiority of the Core of an Economy with Differential Information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 195-216, April.
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    Cited by:

    1. Dionysius Glycopantis & Nicholas C. Yannelis, 2018. "The maximin equilibrium and the PBE under ambiguity," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 183-199, October.
    2. Luciano I. Castro & Marialaura Pesce & Nicholas C. Yannelis, 2020. "A new approach to the rational expectations equilibrium: existence, optimality and incentive compatibility," Annals of Finance, Springer, vol. 16(1), pages 1-61, March.
    3. He, Wei & Yannelis, Nicholas C., 2015. "Equilibrium theory under ambiguity," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 86-95.
    4. Zhiwei Liu, 2016. "Implementation of maximin rational expectations equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(4), pages 813-837, October.
    5. Luciano I. Castro & Zhiwei Liu & Nicholas C. Yannelis, 2017. "Ambiguous implementation: the partition model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 233-261, January.
    6. Sun, Xiang & Sun, Yeneng & Wu, Lei & Yannelis, Nicholas C., 2017. "Equilibria and incentives in private information economies," Journal of Economic Theory, Elsevier, vol. 169(C), pages 474-488.
    7. de Castro, Luciano I. & Liu, Zhiwei & Yannelis, Nicholas C., 2017. "Implementation under ambiguity," Games and Economic Behavior, Elsevier, vol. 101(C), pages 20-33.
    8. Chen Li & Uyanga Turmunkh & Peter P. Wakker, 2019. "Trust as a decision under ambiguity," Experimental Economics, Springer;Economic Science Association, vol. 22(1), pages 51-75, March.
    9. Wei He & Nicholas C. Yannelis, 2017. "A remark on discontinuous games with asymmetric information and ambiguity," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 119-126, April.
    10. Zhiwei Liu & Nicholas C. Yannelis, 2021. "Persuasion in an asymmetric information economy: a justification of Wald’s maxmin preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 801-833, October.
    11. Anuj Bhowmik, 2015. "Core and coalitional fairness: the case of information sharing rules," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(3), pages 461-494, November.
    12. Liu, Zhiwei & Song, Xinxi & Yannelis, Nicholas C., 2020. "Randomization under ambiguity: Efficiency and incentive compatibility," Journal of Mathematical Economics, Elsevier, vol. 90(C), pages 1-11.
    13. Zhiwei Liu & Nicholas C. Yannelis, 2022. "Mixed strategy implementation under ambiguity," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 167-181, May.
    14. Bogdan Klishchuk, 2018. "Multiple markets: new perspective on nonlinear pricing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(2), pages 525-545, August.
    15. Huiyi Guo & Nicholas C. Yannelis, 2022. "Incentive compatibility under ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 565-593, April.
    16. Youcef Askoura, 2019. "An interim core for normal form games and exchange economies with incomplete information: a correction," Papers 1903.09867, arXiv.org.

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    More about this item

    Keywords

    Asymmetric information; Maxmin value allocation; Incentive compatibility; Efficiency; D5; D81; D82; D86;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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