Value Allocation Under Ambiguity

Abstract

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 (maximin) incentive compatibility. We prove existence and incentive compatibility of the maximin value allocation, when the economy's state space is either finite or non-finite. In the latter case, we provide two different existence results: assuming first countable and then uncountable infinitely many states of nature of the world. We conclude that unlike the Bayesian value allocation approach, incentive compatibility is related to efficiency rather than to direct exchange of information.

Date of Award	1 Aug 2015
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Leonidas Koutsougeras (Supervisor) & Nicholas Yannelis (Supervisor)