General equilibrium, wariness and efficient bubbles. (English) Zbl 1247.91100
Summary: Wary consumers overlook gains but not losses in remote sets of dates or states. As preferences are upper but not lower Mackey semi-continuous, T. F. Bewley’s [“Existence of equilibria in economies with infinitely many commodities”, J. Econ. Theory 4, No. 3, 514–540 (1972; doi:10.1016/0022-0531(72)90136-6)] result on existence of an equilibrium whose prices are not necessarily countably additive holds. Wariness is related to lack of myopia and to ambiguity aversion (and, therefore, to T. F. Bewley’s [Decis. Econ. Finance 25, No. 2, 79–110 (2002; Zbl 1041.91023)] work on Knightian uncertainty). Wary infinitely living agents have weaker transversality conditions allowing them to be creditors at infinity and for bubbles to occur in positive net supply assets completing the markets. There are efficient allocations that can only be implemented with asset bubbles.
MSC:
| 91B50 | General equilibrium theory |
Citations:
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