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A Welfare Criterion for Models with Distorted Beliefs / Markus K. Brunnermeier, Alp Simsek, Wei Xiong.
- Format:
- Book
- Author/Creator:
- Brunnermeier, Markus K.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w20691.
- NBER working paper series no. w20691
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2014.
- Summary:
- This paper proposes a welfare criterion for economies in which agents have heterogeneously distorted beliefs. Instead of taking a stand on whose belief is correct, our criterion asserts that an allocation is belief-neutral efficient (inefficient) if it is efficient (inefficient) under any convex combination of agents' beliefs. While this criterion gives an incomplete ranking of social allocations, it can identify positive- and negative-sum speculation driven by conflicting beliefs in a broad range of economic environments.
- Notes:
- Print version record
- November 2014.
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