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Efficient Allocations under Ambiguity

  • Tomasz Strzalecki
  • Jan Werner

An important implication of the expected utility model under risk aversion is that if agents have the same probability belief, then the efficient allocations under uncertainty are comonotone with the aggregate endowment, and if their beliefs are concordant, then the efficient allocations are measurable with respect to the aggregate endowment. We study these two properties of efficient allocations for models of preferences that exhibit ambiguity aversion using the concept of conditional belief, which we introduce in this paper. We provide characterizations of such conditional beliefs for the standard models of preferences used in applications. ?

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Paper provided by Harvard University OpenScholar in its series Working Paper with number 8325.

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Handle: RePEc:qsh:wpaper:8325
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