Stochastic Preferences and General Equilibrium Theory

Freddy Delbaen
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Freddy Delbaen: University of Brussels

Chapter 7 in Allocation under Uncertainty: Equilibrium and Optimality, 1974, pp 98-109 from Palgrave Macmillan

Abstract: Abstract This paper is an attempt to introduce stochastic events in consumer behaviour and the related equilibrium theory. The idea of stochastic behaviour is not very new as may be seen from the literature. Nevertheless, it is not introduced in the current theory of general equilibrium. Indeed, one always supposes that people behave rationally (i.e. their preferences can be represented by a continuous utility function). In psychology such a model is not accepted and one tries to replace the ‘homo deterministicus’ by the ‘homo stochas-ticus’ (this is done keeping in mind that they are both ‘homo sapiens’). The introduction of stochastic individuals in general equilibrium theory is an idea of W. Hildenbrand [9]. This paper generalises his results, since we use only asymptotic independence instead of independence. See also [3] for another application to general equilibrium analysis.

Date: 1974
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DOI: 10.1007/978-1-349-01989-2_7

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