Non-Implementability of Arrow-Debreu Equilibria by Continuous Trading under Knightian Uncertainty

Frank Riedel and Patrick Beißner
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Patrick Beißner: Center for Mathematical Economics, Bielefeld University
Authors registered in the RePEc Author Service: Patrick Beißner

No 527, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: Under risk, Arrow-Debreu equilibria can be implemented as Radner equilibria by continuous trading of few long-lived securities. We show that this result generically fails if there is Knightian uncertainty in the volatility. Implementation is only possible if all discounted net trades of the equilibrium allocation are mean ambiguity-free.

Keywords: Knightian Uncertainty; Ambiguity; general Equilibrium; Asset Pricing; Radner Equilibrium (search for similar items in EconPapers)
Pages: 29
Date: 2016-03-16
New Economics Papers: this item is included in nep-hpe and nep-mic
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Citations: View citations in EconPapers (2)

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https://pub.uni-bielefeld.de/download/2901673/2902682 First Version, 2014 (application/x-download)

Related works:
Working Paper: Non-Implementability of Arrow-Debreu Equilibria by Continuous Trading under Knightian Uncertainty (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:527

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