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Equilibrium theory under ambiguity

Wei He and Nicholas C. Yannelis

Journal of Mathematical Economics, 2015, vol. 61, issue C, 86-95

Abstract: We extend the classical results on the Walras–core existence and equivalence to an ambiguous asymmetric information economy; that is, an economy where agents maximize Maximin Expected Utility (MEU). The interest of considering ambiguity arises from the fact that, in the presence of MEU decision making, there is no conflict between efficiency and incentive compatibility (contrary to the Bayesian decision making). Our new modeling of an ambiguous asymmetric information economy necessitates new equilibrium notions, which are always efficient and incentive compatible.

Keywords: Maximin expected utility; Maximin expectations equilibrium; Maximin core; Core–Walras equivalence; Maximin incentive compatibility (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:eee:mateco:v:61:y:2015:i:c:p:86-95