A Welfare Criterion For Models With Distorted Beliefs

Markus Brunnermeier, Alp Simsek and Wei Xiong

The Quarterly Journal of Economics, 2014, vol. 129, issue 4, 1753-1797

Abstract: This article proposes a welfare criterion for economies in which agents have heterogeneously distorted beliefs. Instead of taking a stand on whose belief is correct, our criterion asserts that an allocation is belief-neutral efficient (inefficient) if it is efficient (inefficient) under any convex combination of agents’ beliefs. Although this criterion gives an incomplete ranking of social allocations, it can identify positive- and negative-sum speculation driven by conflicting beliefs in a broad range of economic environments. JEL Codes: D61, D62, D84, G12, G14.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (128)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qju025 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: A Welfare Criterion for Models with Distorted Beliefs (2014)
Working Paper: A Welfare Criterion for Models with Distorted Beliefs (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:129:y:2014:i:4:p:1753-1797

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().