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Welfare Implications of Mitigating Investment Uncertainty

Takayuki Ogawa () and Jun Sakamoto ()
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Takayuki Ogawa: Faculty of Economics, Osaka University of Economics
Jun Sakamoto: Graduate School of Economics, Osaka University

No 18-33-Rev., Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper explores the welfare implications of mitigating investment uncertainty in the context of Easley and O fHara (2009) [Ambiguity and Nonparticipation: The Role of Regulation. Review of Financial Studies 22(5), 1817-1843]. While one may expect welfare gains to be had by encouraging participation in financial markets by ambiguity-averse investors, we formally show that it hurts other investors and is not Pareto-improving without appropriate income transfers.

Keywords: Ambiguity; Heterogenous agents; Uncertainty; Welfare effects (search for similar items in EconPapers)
JEL-codes: D81 G11 G18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: 2018-12, Revised 2018-12
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