We define the concept of market beliefs in an economy with disagreement, such that equilibrium in a representative agent economy with market beliefs is equivalent to equilibrium in the disagreement economy. In general, the mapping from individual agent beliefs to market beliefs is complex and...

In a production economy, in which agents have heterogeneous beliefs and a social planner has incomplete knowledge about which beliefs are correct, we introduce the concept of Incomplete Knowledge (IK) efficiency. IK-inefficient allocations can be improved upon without taking a stand on which...

We analyze the performance of irrational investors, who mistake expected returns of assets in a multi-asset economy. Mistakes by probabilistically unsophisticated investors that a priori seem small lead to severe underperformance compared with rational investors, under general conditions. Our...