Efficient Allocations under Ambiguity

Tomasz Strzalecki and Jan Werner

Scholarly Articles from Harvard University Department of Economics

Abstract: Important implications of the expected utility hypothesis and risk aversion are that if agents have the same probability belief, then consumption plans in every efficient allocation of resources under uncertainty are comonotone with the aggregate endowment, and if their beliefs are concordant, then the consumption plans are measurable with respect to the aggregate endowment. We study these two properties of efficient allocations for models of preferences that exhibit ambiguity aversion using the concept of conditional beliefs, which we introduce in this paper. We provide characterizations of such conditional beliefs for the standard models of preferences used in applications.

Date: 2011
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Published in Journal of Economic Theory

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Related works:
Journal Article: Efficient allocations under ambiguity (2011)
Working Paper: Efficient Allocations under Ambiguity
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Persistent link: https://EconPapers.repec.org/RePEc:hrv:faseco:11352637

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