Real indeterminacy of general equilibrium under Knightian uncertainty

Wei Ma

Journal of Mathematical Economics, 2018, vol. 79, issue C, 106-111

Abstract: This paper studies the real indeterminacy of equilibria under Knightian uncertainty for economies with incomplete markets of nominal assets. Noting that the preference represented by Knightian uncertainty is incomplete and it induces in a natural way a set of complete preferences, we set ourselves the task of inquiring the relationship between an equilibrium under Knightian uncertainty and its counterpart under the induced complete preferences. It is shown that they are actually equivalent. By means of that equivalence, we show that the real indeterminacy of equilibria caused purely by Knightian uncertainty is the product of the number of agents and the number of assets marketed.

Keywords: General equilibrium; Knightian uncertainty; Indeterminacy (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:79:y:2018:i:c:p:106-111

DOI: 10.1016/j.jmateco.2018.04.008

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