Al-Najjar, Nabil, Anderlini, Luca and Felli, Leonardo (2002) Unforeseen contingencies. . Centre for Economic Policy Research (Great Britain), London, UK.
Full text not available from this repository.Abstract
We develop a model of unforeseen contingencies. These are contingencies that are understood by economic agents — their consequences and probabilities are known — but are such that every description of such events necessarily leaves out relevant features that have a non-negligible impact on the parties’ expected utilities. Using a simple co-insurance problem as a backdrop, we introduce a model where states are described in terms of objective features, and the description of an event specifies a finite number of such features. In this setting, unforeseen contingencies are present in the coinsurance problem when the first-best risk-sharing contract varies with the states of nature in a complex way that makes it highly sensitive to the component features of the states. In this environment, although agents can compute expected pay-offs, they are unable to include in any ex ante agreement a description of the relevant contingencies that captures (even approximately) the relevant complexity of the risky environment.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | http://www.cepr.org |
| Additional Information: | © 2002 Nabir I Al-Najjar, Luca Anderlini and Leonardo Felli |
| Divisions: | Financial Markets Group Economics STICERD |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C69 - Other D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D89 - Other |
| Date Deposited: | 04 Jun 2008 14:36 |
| Last Modified: | 11 Dec 2024 18:33 |
| URI: | http://eprints.lse.ac.uk/id/eprint/5349 |
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