We consider a stylized bond-equity economy, which though incomplete per se, has a rich enough set of assets available for trade such that given standard assumptions about behavior under uncertainty, the equilibrium allocation would arbitrarily approximate a complete market allocation. We show,...

This paper explores the consequences of non-additive expected utility on risk-sharing and equilibrium in a general equilibrium set-up. We establish that convexity of an agent's preferences (or strong uncertainty aversion) is equivalent to the convexity of his capacity and concavity of his...

We show, in the Choquet expected utility model, that prefernece for diversification, that is, convex prefrences, is equivalent to a concave utility index and a convex capacity. We then introduce a weaker notion of diversification, namely "sure diversification". We show that this implies that the...

Cette note considere un eeconomie d'echange a deux periodes dans laquelle les dotations sont incertaines. En plus de cette incertitude economique, existe une incertitude pesant sur les paiements des actifs financiers. Les agents ont des croyances non-additives en ce qui concerne l'incertitude...

In an exchange economy with no aggregate uncertainty, and Bayesian agents, Pareto optimal allocations provide full insurance if and only if the agents have a common prior. It is hard to explain why there is relatively so little betting taking place. One is led to ask, when are full insurance...