Non-Implementability of Arrow-Debreu Equilibria by Continuous Trading under Knightian Uncertainty

Patrick Beißner and Frank Riedel

Papers from arXiv.org

Abstract: Under risk, Arrow-Debreu equilibria can be implemented as Radner equilibria by continuous trading of few long-lived securities. We show that this result generically fails if there is Knightian uncertainty in the volatility. Implementation is only possible if all discounted net trades of the equilibrium allocation are mean ambiguity-free.

Date: 2014-09
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Related works:
Working Paper: Non-Implementability of Arrow-Debreu Equilibria by Continuous Trading under Knightian Uncertainty (2016)
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