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Lecture Notes for ACE 501 - Risk and Info: Theory and App with Nelson at Illinois (UIUC)

Notes Information

Material Type:Class Note
Professor:Nelson
Class:ACE 501 - Risk and Info: Theory and App
Subject:Agr & Consumer Economics
University:University of Illinois - Urbana-Champaign
Term:Fall 2008
Keywords:
  • Scarce Good
  • The Economy
  • Welfare Economics
  • Uncertainty
  • Commodities
  • Market Equilibrium
  • Explanation
  • Probabilities
  • Characterization
  • Complications
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ACE 501 Fall, 2008 ACE 501 Lecture Notes - 10/22/08 Carl H. Nelson 1 General equilibrium We are going to spend a short time on general equilibrium under uncertainty (MWG, chapter 19) because it is important to understand Pareto optimal risk sharing in order to fully understand results about contracting under asymmetric information and mechanism design. General equilibrium and the fundamental theorems of welfare economics will be more fully covered in ACE 503. But since MWG 19 is never covered in that course, we will cover the basic arguments that appear in that chapter. We will start with the basic notation of general equilibrium and the two funda- mental theorems of welfare economics. Then we will discuss how the literature, especially Debreu and Arrow, have extended these results to models with uncer- tain outcomes. To concentrate on basic arguments we will restrict our consider- ation to models of exchange (in contrast to models with production, which add complications but nothing substanti...

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