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Do sunspots matter when agents are Choquet-expected-utility maximizers?

Author

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  • Jean-Marc Tallon

    (M.A.D. - UP1 - Université Paris 1 Panthéon-Sorbonne)

Abstract

We consider a two-period, complete market economy in which agents' preferences are represented by a non-additive expected utility. If agents are optimistic i.e. if the measure according to which they compute their expected utility is subadditive, sunspots matter at equilibrium. If agents are pessimistic i.e. if their measure is convex, and share the same beliefs, sunspots do not matter at equilibrium, and the (normalized) equilibrium price is indeterminate. In this latter case, one can even allow for different beliefs among agents and still have that sunspots do not matter. The analysis is contrasted with the case of additive beliefs studied by Cass and Shell, Journal of Political Economy 91 (1983), pp. 193–227.

Suggested Citation

  • Jean-Marc Tallon, 1998. "Do sunspots matter when agents are Choquet-expected-utility maximizers?," Post-Print halshs-00502493, HAL.
    • Handle: RePEc:hal:journl:halshs-00502493
    DOI: 10.1016/S0165-1889(97)00063-8
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    Cited by:

    1. Martins-da-Rocha, V. Filipe, 2010. "Interim efficiency with MEU-preferences," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1987-2017, September.
    2. Patrick Beissner & Frank Riedel, 2014. "Non-Implementability of Arrow-Debreu Equilibria by Continuous Trading under Knightian Uncertainty," Papers 1409.6940, arXiv.org.
    3. 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.
    4. Kajii, Atsushi & Ui, Takashi, 2006. "Agreeable bets with multiple priors," Journal of Economic Theory, Elsevier, vol. 128(1), pages 299-305, May.
    5. Chateauneuf, Alain & Dana, Rose-Anne & Tallon, Jean-Marc, 2000. "Optimal risk-sharing rules and equilibria with Choquet-expected-utility," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 191-214, October.
    6. Alain Chateauneuf & Luciano De Castro, 2011. "Ambiguity Aversion and Absence of Trade," Discussion Papers 1535, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Patrick Beissner & Frank Riedel, 2018. "Non-implementability of Arrow–Debreu equilibria by continuous trading under volatility uncertainty," Finance and Stochastics, Springer, vol. 22(3), pages 603-620, July.
    8. repec:dau:papers:123456789/5461 is not listed on IDEAS
    9. Jean-Marc Tallon & Alain Chateauneuf, 2002. "Diversification, convex preferences and non-empty core in the Choquet expected utility model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(3), pages 509-523.
    10. Eisei Ohtaki, 2016. "Optimality of the Friedman rule under ambiguity," Working Papers e103, Tokyo Center for Economic Research.
    11. Cozzi, Guido & Giordani, Paolo E., 2006. "Do sunspots matter under complete ignorance?," Research in Economics, Elsevier, vol. 60(3), pages 148-154, September.
    12. 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.
    13. Antoine Billot & Alain Chateauneuf & Itzhak Gilboa & Jean-Marc Tallon, 2000. "Sharing Beliefs: Between Agreeing and Disagreeing," Econometrica, Econometric Society, vol. 68(3), pages 685-694, May.
    14. 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.

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