Ambiguity aversion and the absence of indexed debt
نویسندگان
چکیده
منابع مشابه
Ambiguity aversion and the absence of indexed debt1
Following the seminal works of Schmeidler (1989), Gilboa and Schmeidler (1989), roughly put, an agent’s subjective beliefs are said to be ambiguous if the beliefs may not be represented by a unique probability distribution, in the standard Bayesian fashion, but instead by a set of probabilities. An ambiguity averse decision maker evaluates an act by the minimum expected value that may be associ...
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In a equilibrium model with uncertainty averse consumers, we prove that more ambiguity aversion implies less trade. The reduction in trade caused by ambiguity aversion can be as severe as to lead to no-trade, even in the Choquet Expected Utility (CEU) or Maximin Expected Utility (MEU) models. Our results do not assume that consumers have constant endowments, as usual in the literature, but only...
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This paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their wage contracts even when inflation is uncertain, unless the perceived inflation uncertainty is hi...
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Consider the following choice problem, known as “Ellsberg’s three-color urn example”, or simply the “Ellsberg Paradox” (Ellsberg [7]). An urn contains 30 red balls, and 60 green and blue balls, in unspecified proportions; subjects are asked to compare (i) a bet on a red draw vs. a bet on a green draw, and (ii) a bet on a red or blue draw vs. a bet on a green or blue draw. If the subject wins a ...
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A tax-smoothing objective is used to assess the optimal composition of public debt with respect to maturity and contingencies. This objective motivates the government to make its debt payouts contingent on the levels of public outlay and the tax base. If these contingencies are present, but asset prices of non-contingent indexed debt are stochastic, then full tax smoothing dictates an optimal m...
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ژورنال
عنوان ژورنال: Economic Theory
سال: 2004
ISSN: 0938-2259,1432-0479
DOI: 10.1007/s00199-004-0505-5