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Article
Prudent expectations equilibrium in economies with uncertain delivery
Economic Theory (2009)
  • Joao Correia-da-Silva, Universidade do Porto
  • Carlos Hervés-Beloso, Universidad de Vigo
Abstract
In an economy with private information, we introduce the notion of objects of choice as lists of bundles out of which the market selects one for delivery. This leads to an extension of the model of Arrow–Debreu that is used to study trade ex ante with private state verification. Under the assumption that agents are prudent, equilibrium is characterized by the fact that agents consume bundles with the same utility in states that they do not distinguish. This is a weaker condition than the restriction of equal consumption imposed by Radner (Econometrica 36(1), 31–58, 1968), therefore, some no trade situations are avoided and the efficiency of trade increases.
Keywords
  • General equilibrium,
  • Differential information,
  • Radner equilibrium,
  • Ambiguity,
  • Incomplete contracts,
  • Uncertain delivery,
  • Lists of bundles.
Disciplines
Publication Date
2009
Citation Information
Joao Correia-da-Silva and Carlos Hervés-Beloso. "Prudent expectations equilibrium in economies with uncertain delivery" Economic Theory Vol. 39 Iss. 1 (2009)
Available at: http://works.bepress.com/joao/3/