General equilibrium in markets for lemons

This paper studies exchange economies in which agents have differential information about the goods that the other agents bring to the market. To study such a setting, it is useful to distinguish goods not only by their physical characteristics, but also by the agent that brings them to the market. Equilibrium is shown to exist, with agents receiving the cheapest bundle among those that they cannot distinguish from the truthful delivery. An example is presented as an illustration.     

Endogenous restricted participation in general financial equilibrium

We consider an incomplete market model with numeraire assets. Each household faces an individual constraint on its participation in the asset market. In related literature, the constraint is described by a function whose sole argument is the asset portfolio. On the contrary, in our analysis the constraint depends not only on the asset portfolio, but also on asset and good prices—hence the reference to endogenous (in contrast to exogenous) in the title.     

Excess demand function around critical prices in incomplete markets

We show that the aggregate excess demand function in an economy with incomplete real asset markets can be characterized by Walras’ law, homogeneity, and continuity around critical prices that cause one-dimensional drop of the dimension of the budget set.     

On financial equilibrium with intermediation costs

This paper studies the set of competitive equilibria in financial economies with intermediation costs. We consider an arbitrary dividend structure, which includes options and equity with limited liabilities. We show a general existence result and upper-hemi continuity of the equilibrium correspondence. Finally, we prove that when intermediation costs approach zero, unbounded volume of asset trades is a necessary and sufficient condition, provided that, there is no financial equilibrium without intermediation costs.     

The New Keynesian Phillips curve with myopic agents

Empirical estimations of the New Keynesian Phillips curve support hybrid versions with a positive weight on lagged inflation and a weight less than one on expected inflation. We argue that myopic price setting of some agents explains the low weight on expected inflation. The lagged term can be explained by trend extrapolation if information about the future is costly. In a laboratory experiment we implement the Calvo (1983) microfoundations of the Phillips curve. Our hypotheses are supported by the experimental data. About half of the subjects set optimal Calvo prices while about a third is myopic.     

Quantification of preferences in markets

In this paper we quantify agent preferences in a market. In our framework every agent has a utility level associated with each transaction, and we assume that the probability of a feasible market transaction increases with an increase in total utility. It is surprising to observe that this simple behavioral principle induces a usually unique probability measure that can be constructed by a fast numerical algorithm. This unusual combination of a rigorous model and a fast numerical algorithm makes it possible to construct a well-defined set of preferences that implies a set of observed commodity prices.     

Recursive equilibrium in stochastic OLG economies: Incomplete markets

We prove generic existence of recursive equilibrium for overlapping generations economies with uncertainty and incomplete financial markets. Generic here means in a residual set of utilities and endowments. The result holds provided there is sufficient intragenerational household heterogeneity, and transition probabilities and the asset payoff matrix satisfy mild regularity conditions. The paper also provides a new methodological technique to establish comparative statics, or perturbation, properties in such environments.     

多归属纵向差异化双边市场下竞争均衡

双边市场作为产业组织理论研究的热点问题,涉及平台纵向差异化的研究还很少,本文依照现实中普遍存在的双边的多归属和平台之间差异化的情况,构造了网络外部性参数不对称的多归属差异化Hoteling模型,并考察了新均衡下双边平台的定价、市场势力和利润情况。我们发现,单归属均衡受平台质量差别程度影响,多归属均衡受相异平台质量影响较大;网络外部性参数的不对称是双边市场与单边市场均衡差别的主要原因;其次与单归属均衡结果相比,多归属差异化均衡时拉大了两平台间上下游定价、市场份额和利润差额。     

Absolute approximations to equilibrium in markets with non-convex preferences

It is by now a well-known result that non-convexity can be ‘cured’ in large markets. There exist approximations to core allocations and competitive equilibria, in these approximations the excess demand is made small relative to the size of the economy. This work is concerned with absolute approximations, that is, making the excess demand itself arbitrarily small.     

Intertemporal coordination in two-period markets

This paper studies the stability of the intertemporal coordination dynamics when the common knowledge of individual expectations of future prices is perturbed in a neighborhood of a perfect foresight equilibrium. The main forces that affect stability are: (i) the effect of a change in asset demand on second period spot market prices, and (ii) the effect on asset demand of a small change in second period prices. In an intertemporal market game whose interior Markov perfect equilibria correspond to perfect foresight equilibria, it is shown that though M-rationalizability implies the stability of the intertemporal dynamics, the converse is not always true.     

Inter-temporal preference for flexibility and risky choice

We derive an inter-temporal theory of choice, in the spirit of Kreps and Porteus [Kreps, D.M., Porteus, E.L., 1978. Temporal resolution of uncertainty and dynamic choice theory. Econometrica 46, 185–200], where decision makers have incomplete preferences. This can be used to model indecisiveness as well as unforeseen contingencies. The key to our approach is a time consistency condition and therefore the normative connection between ex-ante and ex-post choice. The time consistency condition enables a representation that is a straight forward extension of recursive utility with the exception that it features an inter-temporal ‘utility for flexibility’.     

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.     

Stochastic utility theorem

This paper analyzes individual decision making. It is assumed that an individual does not have a preference relation on the set of lotteries. Instead, the primitive of choice is a choice probability that captures the likelihood of one lottery being chosen over the other. Choice probabilities have a stochastic utility representation if they can be written as a non-decreasing function of the difference in expected utilities of the lotteries. Choice probabilities admit a stochastic utility representation if and only if they are complete, strongly transitive, continuous, independent of common consequences and interchangeable. Axioms of stochastic utility are consistent with systematic violations of betweenness and a common ratio effect but not with a common consequence effect. Special cases of stochastic utility include the Fechner model of random errors, Luce choice model and a tremble model of [Harless, D., Camerer, C., 1994. The predictive utility of generalized expected utility theories. Econometrica 62, 1251–1289].