Xiong, Wei; Simsek, Alp; Brunnermeier, Markus - Society for Economic Dynamics - SED - 2014
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 an allocation to be belief-neutral efficient (inefficient) if it is efficient (inefficient) under any convex...