Ambiguity Aversion and the Absence of Wage Indexation.
This paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
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Elsevier
2004
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| _version_ | 1826270127097643008 |
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| author | Mukerji, S Tallon, J |
| author_facet | Mukerji, S Tallon, J |
| author_sort | Mukerji, S |
| collection | OXFORD |
| description | This paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their wage contracts even when inflation is uncertain, unless the perceived inflation uncertainty is high enough. Significantly, the exercise does not presume any exogenous costs (e.g., transactions costs) of including indexation links. |
| first_indexed | 2024-03-06T21:35:58Z |
| format | Journal article |
| id | oxford-uuid:46487aa9-3a80-4c47-a537-739c5ee190c4 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T21:35:58Z |
| publishDate | 2004 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:46487aa9-3a80-4c47-a537-739c5ee190c42022-03-26T15:12:48ZAmbiguity Aversion and the Absence of Wage Indexation.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:46487aa9-3a80-4c47-a537-739c5ee190c4EnglishDepartment of Economics - ePrintsElsevier2004Mukerji, STallon, JThis paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their wage contracts even when inflation is uncertain, unless the perceived inflation uncertainty is high enough. Significantly, the exercise does not presume any exogenous costs (e.g., transactions costs) of including indexation links. |
| spellingShingle | Mukerji, S Tallon, J Ambiguity Aversion and the Absence of Wage Indexation. |
| title | Ambiguity Aversion and the Absence of Wage Indexation. |
| title_full | Ambiguity Aversion and the Absence of Wage Indexation. |
| title_fullStr | Ambiguity Aversion and the Absence of Wage Indexation. |
| title_full_unstemmed | Ambiguity Aversion and the Absence of Wage Indexation. |
| title_short | Ambiguity Aversion and the Absence of Wage Indexation. |
| title_sort | ambiguity aversion and the absence of wage indexation |
| work_keys_str_mv | AT mukerjis ambiguityaversionandtheabsenceofwageindexation AT tallonj ambiguityaversionandtheabsenceofwageindexation |