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Sharing Model Uncertainty

Author

Listed:
  • Chiaki Hara

    (Kyoto University)

  • Sujoy Mukerji

    (QMUL - Queen Mary University of London)

  • Frank Riedel

    (Universität Bielefeld = Bielefeld University, UJ - University of Johannesburg [South Africa])

  • Jean-Marc Tallon

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study efficient allocations when consumers have heterogeneous smooth ambiguity preferences, face model uncertainty, and consider a common set of identifiable models. Aggregate endowment is ambigu- ous. We characterize economies where the representative consumer is of the smooth ambiguity type and find efficient sharing rules. With heterogeneous ambiguity aversion, sharing rules exhibit systematic de- partures from those in vNM-economies and the representative consumer's nature departs from the typical single-consumer assumption, making for more compelling asset-pricing predictions. We focus on the case where models are point-identified but show that the insights extend when models are only partially-identified.

Suggested Citation

  • Chiaki Hara & Sujoy Mukerji & Frank Riedel & Jean-Marc Tallon, 2024. "Sharing Model Uncertainty," Working Papers halshs-04598577, HAL.
    • Handle: RePEc:hal:wpaper:halshs-04598577
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04598577
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