Non-Implementability of Arrow-Debreu Equilibria by Continuous Trading Under Knightian Uncertainty

Under risk, Arrow-Debreu equilibria can be implemented as Radner equilibria by continuous trading of few long-lived securities. We show that this result generically fails if there is Knightian uncertainty in the volatility. Implementation is only possible if all discounted net trades of the equilibrium allocation are mean ambiguity-free.

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Year of publication:	2014
Authors:	Riedel, Frank ; Beissner, Patrick
Publisher:	Bielefeld : Bielefeld University, Center for Mathematical Economics (IMW)
Subject:	Knightian Uncertainty \| Ambiguity \| General Equilibrium \| Asset Pricing \| Radner Equilibrium

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Series:	Center for Mathematical Economics Working Papers ; 527
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	10.2139/ssrn.2500793 [DOI] 798139765 [GVK] hdl:10419/103925 [Handle] RePEc:bie:wpaper:527 [RePEc]
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty ; C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; G11 - Portfolio Choice
Source:	EconStor

Persistent link: https://www.econbiz.de/10010427184