Heterogeneous Agent Economies With Knightian Uncertainty

  title={Heterogeneous Agent Economies With Knightian Uncertainty},
  author={Wen-fang Liu},
This paper studies decentralized economies in which decision-makers do not have full knowledge of the probabilities of the states of nature. This ambiguity is referred to as Knightian uncertainty. Using a general equilibrium heterogeneous-agent model, we show how prices and consumption allocations are altered by the presence of Knightian uncertainty. It is known from previous work that models with Knightian uncertainty can have indeterminant security prices. In a multi-agent setup, we show the… CONTINUE READING