Value allocation under ambiguity

We consider a pure exchange economy with asymmetric information where individual behavior exhibits ambiguity aversion along the line of maximin expected utility decision making. For such economies, we introduce different notions of maximin value allocations. We also introduce a strong notion of ince...

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Bibliographic Details
Published in:Economic theory 2015-05, Vol.59 (1), p.147-167
Main Authors: Angelopoulos, Angelos, Koutsougeras, Leonidas C.
Format: Article
Language:English
Subjects:
Ambiguity
Analysis
Asymmetric information
Consumption
Decision making
Economic efficiency
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Equilibrium
Equilibrium (Economics)
Expected utility
Game Theory
Microeconomics
Public Finance
Research Article
Restrictions
Social and Behav. Sciences
Studies
Utility theory
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Summary:We consider a pure exchange economy with asymmetric information where individual behavior exhibits ambiguity aversion along the line of maximin expected utility decision making. For such economies, we introduce different notions of maximin value allocations. We also introduce a strong notion of incentive compatibility. We prove the existence and incentive compatibility of the maximin value allocation. We conclude that unlike the Bayesian value allocation approach in Krasa Yannelis (Econometrica 62(4):881-900, 1994), incentive compatibility is related to efficiency rather than to direct exchange of information.
ISSN:0938-2259
1432-0479
DOI:10.1007/s00199-014-0812-4