Optimality in an OLG model with nonsmooth preferences
It is a well‐known observation that, in the overlapping generations (OLG) model with the complete market, we can judge optimality of an equilibrium allocation by examining the associated equilibrium price. Motivated by recent development in decision theory under ambiguity, this study reexamines the...
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| Veröffentlicht in: | International journal of economic theory 2023-09, Vol.19 (3), p.611-659 |
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| container_title | International journal of economic theory |
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| creator | Ohtaki, Eisei |
| description | It is a well‐known observation that, in the overlapping generations (OLG) model with the complete market, we can judge optimality of an equilibrium allocation by examining the associated equilibrium price. Motivated by recent development in decision theory under ambiguity, this study reexamines the above observation in a stochastic OLG model with convex but not necessarily smooth preferences. It is shown that optimality of an equilibrium allocation depends on the set of possible supporting prices, not necessarily on the associated equilibrium price itself. Therefore, observations of an equilibrium price do not necessarily tell us precise information on optimality of the equilibrium allocation. |
| doi_str_mv | 10.1111/ijet.12371 |
| format | Article |
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| source | Wiley Online Library - AutoHoldings Journals; EBSCOhost Business Source Complete |
| subjects | Ambiguity conditional golden rule optimality conditional Pareto optimality Decision analysis dominant root criterion Equilibrium nonsmooth preference Prices stochastic overlapping generations model |
| title | Optimality in an OLG model with nonsmooth preferences |
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