Prudent expectations equilibrium in economies with uncertain delivery
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.
KeywordsGeneral equilibrium Private information Radner equilibrium Differential information Incomplete information Knightian uncertainty Ambiguity Incomplete contracts Uncertain delivery Lists of bundles
JEL ClassificationC62 D51 D82
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