Intertemporal equilibria with knightian uncertainty

Arbeitspapier

We study a dynamic and infinite-dimensional model with Knightian uncertainty modeled by incomplete multiple prior preferences. In interior efficient allocations, agents share a common risk-adjusted prior and use the same subjective interest rate. Interior efficient allocations and equilibria coincide with those of economies with subjective expected utility and priors from the agents' multiple prior sets. We show that the set of equilibria with inertia contains the equilibria of the economy with variational preferences anchored at the initial endowments. A case study in an economy without aggregate uncertainty shows that risk is fully insured, while uncertainty can remain fully uninsured. Pessimistic agents with Gilboa-Schmeidler's max-min preferences would fully insure risk and uncertainty.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 440

Classification and Topics

• Classification: Wirtschaft ; Exchange and Production Economies ; Criteria for Decision-Making under Risk and Uncertainty ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Subject: Knightian Uncertainty ; Ambiguity ; Incomplete Preferences ; General Equilibrium Theory ; No Trade ; Intertemporales Gleichgewicht ; Allgemeines Gleichgewicht ; Präferenztheorie ; Entscheidung bei Unsicherheit ; Erwartungsnutzen ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dana, Rose-Anne ; Riedel, Frank
• Event: Veröffentlichung
• (who): Bielefeld University, Institute of Mathematical Economics (IMW)
• (where): Bielefeld
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/43834
• Last update: 10.03.2025, 11:44 AM CET