Expectancy balance model for cash flow

Economic agents try to find out the composition of different forms of assets, and the amount of each, that maximizes total wealth. The money demanded by firms is a function of the benefits and costs of holding it considering other forms of assets. The money held in cash can be remunerated by some earning asset. Even when the money is invested in bank funds or bonds, the interest rate is usually lower than the return that the firm’s business may yield. When the firm keeps idle money in cash, the firm renounces to part of its profitability, incurring in the opportunity cost of not investing in alternatives, named Holding Cost. If the firm gives preference to other assets over cash, the balance level may be insufficient for its disbursement needs. The Shortage Cost is the price of obtaining money by other means. The Expectancy Balance Model (EBM) proposed minimizes the Total Cost (combined Holding and Shortage Costs) of maintaining and transforming money from or into other forms of assets. The EBM is an instrument of cash flow decision that deals with the demand for money by firms employing the maximizing utility of total wealth (set of assets) rule.     

Asset price and wealth dynamics in a financial market with heterogeneous agents

This paper considers a discrete-time model of a financial market with one risky asset and one risk-free asset, where the asset price and wealth dynamics are determined by the interaction of two groups of agents, fundamentalists and chartists. In each period each group allocates its wealth between the risky asset and the safe asset according to myopic expected utility maximization, but the two groups have heterogeneous beliefs about the price change over the next period: the chartists are trend extrapolators, while the fundamentalists expect that the price will return to the fundamental. We assume that investors’ optimal demand for the risky asset depends on wealth, as a result of CRRA utility. A market maker is assumed to adjust the market price at the end of each trading period, based on excess demand and on changes of the underlying reference price. The model results in a nonlinear discrete-time dynamical system, with growing price and wealth processes, but it is reduced to a stationary system in terms of asset returns and wealth shares of the two groups. It is shown that the long-run market dynamics are highly dependent on the parameters which characterize agents’ behaviour as well as on the initial condition. Moreover, for wide ranges of the parameters a (locally) stable fundamental steady state coexists with a stable ‘non-fundamental’ steady state, or with a stable closed orbit, where only chartists survive in the long run: such cases require the numerical and graphical investigation of the basins of attraction. Other dynamic scenarios include periodic orbits and more complex attractors, where in general both types of agents survive in the long run, with time-varying wealth fractions.     

Utility of wealth with many indivisibilities

We introduce a class of utility of wealth functions, called knapsack utility functions, which are appropriate for agents who must choose an optimal collection of indivisible goods subject to a spending constraint. We investigate the concavity/convexity and regularity properties of these functions. We find that convexity–and thus a demand for gambling–is the norm, but that the incentive to gamble is more pronounced at low wealth levels. We consider an intertemporal version of the problem in which the agent faces a credit constraint. We find that the agent’s utility of wealth function closely resembles a knapsack utility function when the agent’s saving rate is low.     

成市化过程中的住房价格与财富分配效应

在快速城市化过程中，住房价格持续上涨并不是由外部因素所决定的，而是内生于经济运行本身。由于住房的双重属性和较大的财富持有差距，一旦住房价格被需求触发，住房的投资属性必然会压过消费属性，由经济内部因素作用而持续上涨，直到价值增值的实现受到制约后，才会改变上涨趋势，经过一段时间之后，这个过程会重新开始。在价格上涨和价值增值的实现过程中，伴随着双重财富分配效应，价格持续上涨不但转移了无房人群的当期财富，而且转移了未来财富，同时具有持久性。要想抑制房价持续上涨，减弱这种分配效应，必须缩小投资收益空间，提高无房人群的支付能力。     

基于边际成本递增的多属性反向拍卖最优策略

针对当前传统的基于单一价格属性的逆向拍卖机制已难以满足企业日益复杂的采购需求的现状,需要研究采购环境下的多属性英式拍卖机制。首先,文中提出了基于边际成本递增的多属性拍卖模型。然后运用多属性效用理论,进一步研究了在多属性英式拍卖机制下投标人的最优投标策略及拍卖人最优评分规则。最后,基于边际成本递增的多属性拍卖模型,研究了不同因素及边际成本对拍卖人最优评分规则的影响。     

Sources of Public Revenue that Make Nations Richer

Among sources of public revenue that make nations richer, the most beneficial are charges for harms, such as pollution and congestion, and charges for the private benefits from public services. Increases in the money supply sufficient to keep price changes in line with expectations are also beneficial. Taxes on concentrations of wealth are beneficial if wealth inequality is considered harmful. Properly administered taxes on land do no harm and are beneficial when markets are imperfect. Among taxes that cause harm, the combination of a tax on labour income and a tax on inheritances is probably the least damaging.     

Can money matter for interest rate policy?

In this paper it is shown that money can matter for macroeconomic stability under interest rate policy when transactions frictions are non-negligible. We develop a sticky price model with a shopping time function, which induces the marginal utility of consumption to depend on the (predetermined) stock of money held at the beginning of the period. Equilibrium stability and uniqueness are then ensured by a passive interest rate policy, whereas activeness is associated with an explosive equilibrium. By reacting to changes in beginning-of-period real balances, the central bank can restore stability. Interest rates further depend on lagged real balances even if the central bank acts in an entirely forward-looking way, as under discretionary optimization. If the model is revised such that end-of-period money provides transaction services, money can in principle be neglected for a stabilizing interest rate policy. Discretionary monetary policy is, however, likely to be associated with equilibrium indeterminacy, which can be avoided if interest rates are set contingent on beginning-of-period real balances.     

When Ross meets Bell: The linex utility function

At first glance, there would appear to be no relationship between Bell’s (1988) concept of one-switch utility functions and that of a stronger measure of risk aversion due to Ross (1981). We show however that specific assumptions about the behavior of the stronger measure of risk aversion also give rise to the linex utility function which belongs to the class of one-switch utility functions. In particular, this utility class is the only one that satisfies a stronger version of Kimball’s (1993) standard risk aversion over all levels of wealth. We apply our results to consider n$n$th-degree deteriorations in background risk and their effect on risk taking behavior.     

Bounds for the utility-indifference prices of non-traded assets in incomplete markets

Abstract We consider a special class of financial models with both traded and non-traded assets and show that the utility indifference (bid) price of a contingent claim on a non-traded asset is bounded above by the expectation under the minimal martingale measure. This bound also represents the marginal bid price for the claim. The key conclusion is that the bound and the marginal bid price are independent of both the utility function and initial wealth of the agent. Thus all utility maximising agents charge the same marginal price for the claim. This conclusion is in some sense the opposite conclusion to that of Hubalek and Schachermayer (2001), who show that any price is consistent with some equivalent martingale measure. Mathematics Subject Classification (2000): 91B28, 91B16, 60J70 Journal of Economic Literature Classification: G13     

Global analysis and economics IV : Finiteness and stability of equilibria with general consumption sets and production

Among other things a global version of the fundamental theorem of welfare economics is proved. One starts with a pure exchange economy with fixed total resources where hypotheses of differentiability, convexity, and monotonicity are made on the utility functions. Let be the set of price equilibria where the initial allocation coincides with the final one. Then the map which assigns to such a price equilibrium, the corresponding allocation is a diffeomorphism (a complete correspondence) between and the set of Pareto Optima.     

Global analysis and economics III: Pareto Optima and price equilibria

Among other things a global version of the fundamental theorem of welfare economics is proved. One starts with a pure exchange economy with fixed total resources where hypotheses of differentiability, convexity, and monotonicity are made on the utility functions. Let ? be the set of price equilibria where the initial allocation coincides with the final one. Then the map which assigns to such a price equilibrium, the corresponding allocation is a diffeomorphism (a complete correspondence) between ? and the set of Pareto Optima.     

The Instability of the Money Demand Function: An I(2) Interpretation

Some studies have suggested that although money and prices appear to be I(2) processes, real money balances are I(1) and this transformation preserves an important long-run relationship between money and prices. In this paper we present evidence indicating that the success of such a nominal-to-real transformation depends upon the particular monetary aggregate under consideration. It turns out that imposing long-run price homogeneity does not remove all I(2) components from a model of aggregate broad UK M4, but it does prove successful in the case of sectoral components of M4. Since recent research on money demand functions finds more stable relationships between sectoral components of M4 and aggregate demand, our analysis seems to point to a direct link between the existence of I(2) components and the stability of different money demand functions.     

Is insurance normal or inferior? -A regret theoretical approach-

This study considers how changes in wealth affect insurance demand when individuals suffer disutility from regret. Anticipated regret stems from a comparison between the ex-post maximum and actual wealth. We consider a situation wherein individuals maximize their expected utility incorporating anticipated regret. The wealth effect on insurance demand can be classified into the risk and the regret effects. These effects are determined by the properties of the utility function and the regret function. We show that insurance can be normal when individuals place weight on anticipated regret, even though the utility function exhibit decreasing absolute risk aversion. This result indicates that regret theory is a possible explanation to the wealth effect puzzle, in which insurance is normal from empirical observation, but it should be inferior by theoretical prediction under expected utility theory.     

On the nature of certainty equivalent functionals

We explore connections between the certainty equivalent return (CER) functional and the underlying utility function. Curvature properties of the functional depend upon how utility function attributes relate to hyperbolic absolute risk aversion (HARA) type utility functions. If the CER functional is concave, i.e., if risk tolerance is concave in wealth, then preferences are standard. The CER functional is linear in lotteries if utility is HARA and lottery payoffs are on a line in state space. Implications for the optimality of portfolio diversification are given. When utility is concave and non-increasing relative risk averse, then the CER functional is superadditive in lotteries. Depending upon the nature of association among lottery payoffs, CERs for constant absolute risk averse utility functions may be subadditive or superadditive in lotteries. Our approach lends itself to straightforward experiments to elicit higher order attributes on risk preferences.     

On the nature of certainty equivalent functionals

We explore connections between the certainty equivalent return (CER) functional and the underlying utility function. Curvature properties of the functional depend upon how utility function attributes relate to hyperbolic absolute risk aversion (HARA) type utility functions. If the CER functional is concave, i.e., if risk tolerance is concave in wealth, then preferences are standard. The CER functional is linear in lotteries if utility is HARA and lottery payoffs are on a line in state space. Implications for the optimality of portfolio diversification are given. When utility is concave and non-increasing relative risk averse, then the CER functional is superadditive in lotteries. Depending upon the nature of association among lottery payoffs, CERs for constant absolute risk averse utility functions may be subadditive or superadditive in lotteries. Our approach lends itself to straightforward experiments to elicit higher order attributes on risk preferences.     

基于信息熵的多属性决策方法在商品住宅价格中的研究

在市场经济条件下,房地产价格在房地产经济发展和房地产经济运行中有着重要的功能和作用,因此,对房价变动的预测以及如何能够合理制定房价,显得尤为重要。价格的预测,究其本质,是一种体现在数值上的决策活动,本文结合了多属性综合决策模型与回归分析对房价进行了预测研究。通过选取影响房价的部分宏观因素,建立基于熵的多属性综合决策模型,得到各因素与房价之间的关系,并通过回归分析,对房价进行预测。     

Identification and stochastic specification in Rosen's hedonic price model

The use of an explicitly specified utility function to derive the inverse demand functions in S. Rosen's hedonic price model provides considerable insight into the correct stochastic specification of the model. It turns out that except in special cases, the inverse demand equations are nonlinear in parameters and cannot be formulated conveniently as regression models. Moreover, the inverse demand functions and the hedonic price function must be estimated simultaneously to obtain consistent estimates of the parameters of these functions. A tractable estimation technique is described. It is desirable to derive the inverse demand functions from a utility specification that is not a strongly separable function of houses' attributes since strong separability implies the existence of deterministic relations among incomes, prices, and observed housing attributes that may fail to hold in applications. Finally, it is shown that the use of an explicitly specified utility function does not guarantee identification of the parameters of Rosen's model.     

概率有序加权算子P-OWG在公路方案优选中的应用

在公路方案优选的多属性方案决策中,运用概率有序加权几何(P-OWG)算子对各方案的属性值进行集成,根据得出的综合属性值对各方案进行排序和优选,可以十分方便的选出最优的方案。     

THE GREAT CONTRACTION

Many historians in the United States (and many teachers in US high schools and colleges) still attribute the Great Depression to the following: the breakdown of capitalism; excessive reliance on laissez-faire policies; inequality of wealth; overproduction and stock market speculation. These purported causes led to the implementation of the New Deal: well-intended, but ultimately ineffective, policies that actually prolonged the duration of the depression. A retrospective analysis of the actions taken by the Federal Reserve, in fact, demonstrate that the Great Depression was caused, in large part, by a massive contraction of the money supply.     

Notes and Comments: Sup-convolutions of HARA utilities in the affine term structure

Abstract In the financial literature, the problem of maximizing the expected utility of the terminal wealth has been investigated extensively (for a survey, see, e.g., Karatzas and Shreve (1998), p. 153, and references therein) by using different approaches. In this paper, we extend the existing literature in two directions. First, we let the utility function U(.) of the financial agent (who is a price taker) be implicitly defined through I(.)=(U ^′ (.))^–1, which is assumed to be additively separable, i.e., I(.)=∑ _k=1 ^N I _k (.). Second, we solve the investment problem in the general affine term structure model proposed by Duffie and Kan (1996) in which the functions I _k (.), k=1,...,N are associated to HARA utility functions (with possibly different risk aversion parameters), and we show that the utility maximization problem leads to a Riccati ODE. Moreover, we extend to the multi-factor framework the stability result proved in Grasselli (2003), namely, the almost-sure convergence of the solution with respect to the parameters of the utility function. Mathematics Subject Classification (2000): 91B28 Journal of Economic Literature Classification: G11