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Trade and Communication Under Subjective Information

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  • Stecher, Jack D.

    () (Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration)

Abstract

This paper models an economy where agents perceive the choices they face subjectively, and have subjective interpretations of the terminology they use in a shared business language. Preferences are defined on what an agent perceives, and not on what is objectively presented to an agent. A business language enables agents to trade, provided the terminology in the language is sufficiently vague: once agents can express more detail than their trading partners can perceive, the language ceases to be useful. Under some regularity conditions on the language, an appropriately defined notion of competitive equilibrium exists. However, much less can be said about welfare than in the neoclassical case, as there are counter-examples to both welfare theorems.

Suggested Citation

  • Stecher, Jack D., 2006. "Trade and Communication Under Subjective Information," Discussion Papers 2006/2, Norwegian School of Economics, Department of Business and Management Science.
  • Handle: RePEc:hhs:nhhfms:2006_002
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    File URL: http://hdl.handle.net/11250/163582
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    References listed on IDEAS

    as
    1. Modica, Salvatore & Rustichini, Aldo, 1999. "Unawareness and Partitional Information Structures," Games and Economic Behavior, Elsevier, vol. 27(2), pages 265-298, May.
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    More about this item

    Keywords

    Language; Perceptual Limits; Unawareness;

    JEL classification:

    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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