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Real indeterminacy of general equilibrium under Knightian uncertainty

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  • Ma, Wei

Abstract

This paper studies the real indeterminacy of equilibria under Knightian uncertainty for economies with incomplete markets of nominal assets. Noting that the preference represented by Knightian uncertainty is incomplete and it induces in a natural way a set of complete preferences, we set ourselves the task of inquiring the relationship between an equilibrium under Knightian uncertainty and its counterpart under the induced complete preferences. It is shown that they are actually equivalent. By means of that equivalence, we show that the real indeterminacy of equilibria caused purely by Knightian uncertainty is the product of the number of agents and the number of assets marketed.

Suggested Citation

  • Ma, Wei, 2018. "Real indeterminacy of general equilibrium under Knightian uncertainty," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 106-111.
    • Handle: RePEc:eee:mateco:v:79:y:2018:i:c:p:106-111
    DOI: 10.1016/j.jmateco.2018.04.008
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    References listed on IDEAS

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    1. Luca Rigotti & Chris Shannon, 2005. "Uncertainty and Risk in Financial Markets," Econometrica, Econometric Society, vol. 73(1), pages 203-243, January.
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    9. Carlier, G. & Dana, R.-A., 2013. "Pareto optima and equilibria when preferences are incompletely known," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1606-1623.
    10. Ma, Wei, 2015. "The existence and efficiency of general equilibrium with incomplete markets under Knightian uncertainty," Economics Letters, Elsevier, vol. 134(C), pages 78-81.
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