Efficient allocations and Equilibria with short-selling and Incomplete Preferences
Rose-Anne Dana (dana@ceremade.dauphine.fr) and
Cuong Le van
Additional contact information
Rose-Anne Dana: CEREMADE - Université Paris-Dauphine and IPAG Business School, https://www.ceremade.dauphine.fr/~dana/
Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne
Abstract:
This article reconsiders the theory of existence of efficient allocations and equilibria when consumption sets are unbounded below under the assumption that agents have incomplete preferences. It is motivated by an example in the theory of assets with short-selling where there is risk and ambiguity. Agents have Bewley's incomplete preferences. As an inertia principle is assumed in markets, equilibria are individually rational. It is shown that a necessary and sufficient condition for the existence of an individually rational efficient allocation or of an equilibrium is that the relative interiors of the risk adjusted sets of probabilities intersect. The more risk averse, the more ambiguity averse the agents, the more likely is an equilibrium to exist. The paper then turns to incomplete preferences represented by a family of concave utility functions. Several definitions of efficiency and of equilibrium with inertia are considered. Sufficient conditions and necessary and sufficient conditions are given for the existence of efficient allocations and equilibria with inertia
Keywords: Uncertainty; risk; risk adjusted prior; no arbitrage; equilibrium with short-selling; incomplete preferences; equilibrium with inertia (search for similar items in EconPapers)
JEL-codes: C62 D50 D81 D84 G1 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2014-05
New Economics Papers: this item is included in nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)
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ftp://mse.univ-paris1.fr/pub/mse/CES2014/14041.pdf (application/pdf)
Related works:
Journal Article: Efficient allocations and equilibria with short-selling and incomplete preferences (2014)
Working Paper: Efficient allocations and equilibria with short-selling and incomplete preferences (2014)
Working Paper: Efficient allocations and Equilibria with short-selling and Incomplete Preferences (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:14041
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