Pareto improving financial innovation in incomplete markets

Summary. In this paper we develop a differential technique for investigating the welfare effects of financial innovation in incomplete markets. Utilizing this technique, and after parametrizing the standard competitive, pure-exchange economy by both endowments and utility functions, we establish the following (weakly) generic property: Let S be the number of states, I be the number of assets and H be the number of households, and consider a particular financial equilibrium. Then, provided that the degree of market incompleteness is sufficiently larger than the extent of household heterogeneity, S−I≥2H−1 [resp. S−I≥H+1], there is an open set of single assets [resp. pairs of assets] whose introduction can make every household better off (and, symmetrically, an open set of single assets [resp. pairs of assets] whose introduction can make them all worse off ). We also devise a very simple nonparametric procedure for reducing extensive household heterogeneity to manageable size, a procedure which not only makes our restrictions on market incompleteness more palatable, but could also prove to be quite useful in other applications involving smooth analysis. Received: August 14, 1995; revised version: April 14, 1997     

Pareto improving price regulation when the asset market is incomplete

Summary. Incomplete asset markets cause competitive equilibria to be constrained suboptimal and provides scope for Pareto improving interventions. In this paper, we examine how intervention in prices in asset or spot commodity markets serves this purpose. We show that, if fix-price equilibria behave sufficiently regularly near Walrasian equilibria, Pareto improving price regulation is generically possible. An advantage of price regulation, contrasted with interventions in individuals asset portfolios, is that it operates anonymously, on market variables.Received: 12 August 2002, Revised: 10 July 2003, JEL Classification Numbers: D45, D52, D60.Earlier and longer versions were circulated as Discussion Paper No. 9841 (June, 1998), CORE, Université Catholique de Louvain, and Working Paper No. 01-31 (2001), Department of Economics, Brown University.The research of Herings was made possible by a fellowship of the Royal Netherlands Academy of Arts and Sciences and a grant of the Netherlands Organization for Scientific Research (NWO); while this paper was being written, he enjoyed the generous hospitality of the Cowles Foundation.John Geanakoplos and Hamid Sabourian asked questions that clarified a number of points in earlier drafts of the paper. An anonymous referee made comments that were insightful and helpful.     

Regularity and Pareto improving on financial equilibria with price-dependent borrowing restrictions

We consider a pure exchange, general equilibrium model, with two periods and a finite number of states, commodities, numeraire assets, and households. Participation in the asset markets is restricted in a household specific manner, imposing upper bounds on the amounts of borrowing which can be obtained using assets. Those bounds are assumed to depend on asset and commodity prices. After establishing existence of equilibria, we show that, generically in the set of the economies, equilibria are finite and regular. Then, we restrict our attention to the significant set of economies in which some associated equilibria exhibit a sufficiently high number of strictly binding participation constraints. We prove that, generically in that set, those equilibria are Pareto improvable through a local change of the participation constraints.     

完善我国外资并购管理政策问题研究

外资并购是当前国际资本流动的新趋势,也是目前我国吸引外资的主要形式,对于盘活国内存量资产、优化产业结构、促进技术进步发挥了积极的作用。但应当引起注意的是,外资并购投资集中在我国关键领域的重点企业,其意图已不完全是商业性的,     

Non-constant Returns,Pareto Optimality and Competitive Equilibrium

Competitive equilibrium is not Pareto optimal if returns to scale are not constant, except in special and accidental circumstances. This result is demonstrated using a classical production model; it holds quite generally and independently of all other sources of Pareto inefficiency, such as externalities, imperfect information and quantity constraints. It establishes a general and ubiquitous basis for critique of the 'invisible hand' ideology, which still dominates both the textbooks and wider reaches of social thought.     

Stochastic Dominance, Pareto Optimality, and Equilibrium Asset Pricing

This paper introduces the concept of a factor subspace in competitive equilibrium asset pricing. A factor subspace contains the market portfolio and is such that every marketed contingent claim is second-order stochastically dominated by a claim from the factor subspace. Conditions are given for the existence of equilibrium, and it is shown how APT and CAPM can be interpreted in the framework of the paper. If sufficiently many call options on the market portfolio are traded, then the space spanned by these options can be used as the factor subspace.     

猪肉价格周期、劳动力价格与通货膨胀

猪肉价格周期变动主要是受到劳动力价格水平的变动影响。农民工的工资变动会导致对劳动力价格敏感的养猪户做出放弃养猪(去打工)或增加养猪(放弃打工)的变化,进而导致猪肉价格的升降变动。工业部门中的可贸易部门的工资变动,使猪肉价格周期变动效应放大。关注可贸易部门的劳动力价格的工资变动,可以预测猪肉价格周期,进而可以预测通货膨胀走势。     

Trade policies, concentration, growth and welfare

The aim of this paper is to analyse, through a theoretical model, the effects that the trade integration of two countries may have on industrial location, growth and welfare.The conclusions reached finally depend both on whether the import or the export costs are affected by the trade policies on which the integration process is based and on whether the rich or the poor country introduces them. In general, when integration leads to an increase of industrial concentration in the rich country, the growth rate increases and welfare improves in both countries. If integration means that industry moves to the poor country, the growth rate decreases; in spite of this, in this case the poor country can also improve its welfare.     

Manipulation and the Pareto rule

This paper examines rules that map preference profiles into choice sets. There are no agendas other than the entire set of alternatives. A rule is said to be “manipulable” if there is a person i, and a preference profile, such that i prefers the choice set obtained when he is dishonest to the one obtained when he is honest. It is “nonmanipulable” if this can never happen. The paper indicates how preferences over choice sets might be sensibly derived from preferences over alternatives, and discusses seven different notions of manipulability associated with seven different assumptions about preferences over sets of alternatives. The paper has two sections of results. In the first I show that the Pareto rule, that is, the rule that maps preference profiles into corresponding sets of Pareto optima, is nonmanipulable in four of the seven senses of manipulability, and manipulable in three of them. In the second section, I examine this conjecture: If an arbitrary rule is nonmanipulable and nonimposed, and if indifference is disallowed, then every choice set must be contained in the set of Pareto optima. The conjecture is true under the strongest definition of nonmanipulability.     

Pareto’s methodological project

A man of realities. A man of facts and calculations. A man who proceeds upon the principle that two and two are four, and nothing over, and who is not to be talked into allowing for anything over. (Charles Dickens, Hard Times, 1854)     

Pareto optimal chains of reinsurance

Extending Arrow (1963), we show that coinsurance is the optimal insurance scheme if all companies belonging to a chain of reinsurance are risk averse. The extent to which Borch's (1960) theorem and corollary are still valid in this context is investigated.     

Two-sided altruism, Lindahl equilibrium, and Pareto optimality in overlapping generations models

Summary. This paper extends the Samuelsonian overlapping generations general equilibrium framework to encompass a variety of altruistic preferences by recasting it into a Lindahl equilibrium framework. The First and the Second Welfare theorems hold for Lindahl equilibrium with respect to the Malinvaud optimality criterion but not with respect to the Pareto optimality criterion. A complete characterization of Pareto optimal allocations is provided using the Lindahl equilibrium prices.Received: 2 October 2003, Revised: 13 September 2004, JEL Classification Numbers: D51, D62, D64, C62.An earlier draft of the paper was prepared for presentation at the Sixth World Congress of the Econometric Society, 1990, Barcelona, Spain. Much of this work was done when I was at Yale University and University of California-San Diego. I am grateful to an anonymous referee of this journal and to Don Brown, Vince Crawford and Joel Sobel for many insightful comments and encouragements on an earlier draft of the paper.     

Serial dictatorship and Pareto optimality

In a deterministic allocation problem in which each agent is entitled to receive exactly one object, an allocation is Pareto optimal if and only if it is the outcome of a serial dictatorship. We extend the definition of serial dictatorship to settings in which some agents may be entitled to receive more than one object, and study the efficiency and uniqueness properties of the equilibrium allocations. We prove that subgame perfect equilibrium allocations of serial dictatorship games are not necessarily Pareto optimal; and generally not all Pareto optima can be implemented as subgame perfect equilibrium allocations of serial dictatorship games, except in the 2-agent separable preference case. Moreover, serial dictatorship games do not necessarily have unique subgame perfect equilibrium allocations, except in the 2-agent case, hence their outcomes are indeterminate and manipulable.     

Self-selection and Pareto efficient taxation

This paper analyses the set of Pareto efficient tax structures. The formulation of the problem as one of self-selection not only shows more clearly the similarity between this problem and a number of other problems (such as the optimal pricing of a monopolist) which have recently been the subject of extensive research, but also allows the derivation of a number of new results. We establish (i) under fairly weak conditions, randomization of tax structures is desirable; (ii) if different individuals are not perfect substitutes for one another in production, then the general equilibrium effects—until now largely ignored in the literature—of changes in the tax structure may be dominant in determining the optimal tax structure; in particular if the relative wage of high ability and low ability individuals depends on the relative supplies of labor, the optimal tax structure entails a negative marginal tax rate on the high ability individuals, and a positive marginal tax rate on the low ability individuals (the marnitude of which depends on the elasticity of substitution); (iii) if individuals differ in their preferences, Pareto efficient taxation may entail negative marginal tax rates for high incomes; while (iv) if wage income is stochastic, the marginal tax rate at the upper end may be 100%.Our analysis thus makes clear that the main qualitative properties of the optimal tax structure to which earlier studies called attention are not robust to these attempts to make the theory more realistic.     

论产品价格、劳动力价格与消费需求

价格高水平变动与消费需求变动的关系比较间接。劳动力相对其他商品的价格不断提高，是经济发展表现出的普遍规律。劳动力价格对产品价格不断提高是消费需求持续增长的必要条件。通过企业之间的竞争来实现劳动生产率的提高和非农产业就业人数的增长，是实现大众消费良性循环的根本措施。     

Sunspots,indeterminacy and Pareto inefficiency in economies with incomplete markets

Summary. We consider two periods economies with both intrinsic and extrinsic uncertainty. Asset markets are incomplete in the certainty economy. If assets are nominal, there are enough commodities and the number of agents is greater than two and smaller than the total number of states of nature tomorrow (minus one), then a sunspot-invariant equilibrium is generically Pareto dominated by some sunspot equilibria. When assets are real, and there are enough commodities, if there are sunspot equilibria, there are sunspot equilibria Pareto dominating sunspot-invariant equilibria under the same restriction on the number of agents (and stronger restrictions on the number of commodities).Received: 20 October 2003, Revised: 1 April 2004, JEL Classification Numbers: D52.I wish to thank Paolo Siconolfi for helpful suggestions and comments. I aknowledge the financial support of M.I.U.R. and the kind hospitality of C.C.D.R. in Summer 2003.     

Vehicle choices, miles driven, and pollution policies

Mobile sources contribute large percentages of each pollutant, but technology is not yet available to measure and tax emissions from each vehicle. We build a behavioral model of household choices about vehicles and miles traveled. The ideal-but-unavailable emissions tax would encourage drivers to abate emissions through many behaviors, some of which involve market transactions that can be observed for feasible market incentives (such as a gas tax, subsidy to new cars, or tax by vehicle type). Our model can calculate behavioral effects of each such price and thus calculate car choices, miles, and emissions. A nested logit structure is used to model discrete choices among different vehicle bundles. We also consider continuous choices of miles driven and the age of each vehicle. We propose a consistent estimation method for both discrete and continuous demands in one step, to capture the interactive effects of simultaneous decisions. Results are compared with those of the traditional sequential estimation procedure.