Core and Equilibria under ambiguity

This paper introduces new core and Walrasian equilibrium notions for an asymmetric information economy with non-expected utility preferences. We prove existence and incentive compatibility results for the new notions we introduce.

A new perspective to rational expectations: maximin rational expectations equilibrium

We introduce a new notion of rational expectations equilibrium (REE) called maximin rational expectations equilibrium (MREE), which is based on the maximin expected utility (MEU) formulation. In particular, agents maximize maximin expected utility conditioned on their own private information and the information that the equilibrium prices generate. Maximin equilibrium allocations need not to be measurable with respect to the private information of each individual and with respect to the information that the equilibrium prices generate, as it is in the case of the Bayesian REE. We prove that a maximin REE exists universally (and not generically as in Radner (1979) and Allen (1981)), it is effcient and incentive compatible. These results are false for the Bayesian REE

On the Limit Points of an Infinitely Repeated Rational Expectations Equilibrium

We show that a symmetric information Rational Expectations Equilibrium (REE) exists universally (and not generically), it is Pareto efficient and obviously incentive compatible. Agents, in a repeated economy framework, can reach a symmetric information REE (i.e., an efficient and incentive compatible equilibrium outcome) by observing the past asymmetric REE and also by updating their private information. We also prove the converse result, i.e., given a symmetric information REE, we can construct a sequence of approximate asymmetric REE allocations that converges to the symmetric information REE. The approximate REE can be interpreted as the mistakes that agents make due to bounded rationality, nonetheless, in the limit an exact symmetric information REE is reached. In view of the above results, the symmetric information REE provides a rationalization for the asymmetric one

The Equitable Bargaining Set

We define the equitable bargaining set for exchange economies. Our definition differs from that in Mas-Colell (1989) because it requires that objections and counterobjections must satisfy some equitability conditions. We show that the equitable bargaining set coincides with that of Mas-Colell when the underlying economy is atomless, but not in general. Then we provide two sets of conditions for economies with market imperfections that apply to finite economies and to mixed market economies. In the first case our conditions imply that the equitable bargaining set is a subset of the core, and so it converges to the set of competitive allocations if the economy is replicated. In the second case, we show that all allocations in the equitable bargaining set are competitive, extending the Walras-bargaining equivalence of Mas-Colell (1989) to the framework of mixed markets. All the conditions we use follow from wellestablished assumptions from the literature in finite and mixed market economies

Strictly fair allocations in economies with atoms

We investigate the fairness property of equal-division competitive market equilibria in differential information economies presenting a two-fold generality: regarding the space of agents which may contain atoms and the informational asymmetries among traders

Equilibrium Analysis under Ambiguity

We combine the study of decision under uncertainty and the analysis of economies under uncertainty and asymmetric information. We carry out comparative static exercises: we show that the set of competitive equilibria expands as ambiguity aversion increases; while the set of efficient allocations is not affected by agents’ attitude towards ambiguity