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Equilibria Under Knightian Price Uncertainty

Beissner, Patrick; Riedel, Frank

Description

We study economies with Knightian uncertainty about state prices. We introduce an equilibrium concept with sublinear prices and prove that equilibria exist under weak conditions. In general, such equilibria lead to inefficient allocations; they coincide with Arrow–Debreu equilibria if and only if the values of net trades are ambiguity‐free in mean. In economies without aggregate uncertainty, inefficiencies are generic. Equilibrium allocations under price uncertainty are efficient in a...[Show more]

CollectionsANU Research Publications
Date published: 2019-01
Type: Journal article
URI: http://hdl.handle.net/1885/206270
Source: Econometrica
DOI: 10.3982/ECTA14934
Access Rights: Open Access

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