Arbeitspapier

Knight-Walras equilibria

Knightian uncertainty leads naturally to nonlinear expectations. We introduce a corresponding equilibrium concept with sublinear prices and establish their existence. In general, such equilibria lead to Pareto inefficiency and coincide with Arrow-Debreu equilibria only if the values of net trades are ambiguity-free in the mean. Without aggregate uncertainty, inefficiencies arise generically. We introduce a constrained efficiency concept, uncertainty-neutral efficiency and show that Knight-Walras equilibrium allocations are efficient in this constrained sense. Arrow-Debreu equilibria turn out to be non-robust with respect to the introduction of Knightian uncertainty.

Language: Englisch

Bibliographic citation: Series: Center for Mathematical Economics Working Papers ; No. 558

Classification: Wirtschaft
Criteria for Decision-Making under Risk and Uncertainty
Optimization Techniques; Programming Models; Dynamic Analysis
Portfolio Choice; Investment Decisions

Subject: Knightian Uncertainty
Ambiguity
General Equilibrium

Event: Geistige Schöpfung

(who): Beißner, Patrick
Riedel, Frank

Event: Veröffentlichung

(who): Bielefeld University, Center for Mathematical Economics (IMW)

(where): Bielefeld

(when): 2016

Handle: http://hdl.handle.net/10419/149015

URN: urn:nbn:de:0070-pub-29035383

Last update: 10.03.2025, 11:45 AM CET

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Object type

Arbeitspapier

Associated

Beißner, Patrick
Riedel, Frank
Bielefeld University, Center for Mathematical Economics (IMW)

Time of origin

2016

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