Existence of equilibria in atomless production economies with price dependent preferences

The existence of a competitive equilibrium for an economy with a measure space of agents is proved by reducing the economy to a three-person game and then applying Debreu's lemma (1952). In addition to the relative simplicity and shortness of the proof, we generalize known results [Aumann (1966), Hildenbrand (1970), Schmeidler (1969)] by allowing both price dependent preferences and satiation.     

A note on the existence of CAPM equilibria with homogeneous cumulative prospect theory preferences

This note identifies and fixes a minor gap in Proposition 1 in Barberis and Huang (Am Econ Rev 98(5):2066–2100, 2008). Assuming homogeneous cumulative prospect theory decision makers, we show that CAPM is a necessary (though not sufficient) condition that must hold in equilibrium. We support our results with numerical examples where security prices become negative.     

Multiple equilibria in two-sector monetary economies: An interplay between preferences and the timing for money

In this paper, we study the occurrence of local indeterminacy in two-sector monetary economies. We consider a general MIUF model with two alternative timings in monetary payments: the Cash-In-Advance timing, in which the cash available to buy goods is money in the consumers’ hands after they leave the bond market but before they enter the goods market, and the Cash-After-the-Market timing, in which agents hold money for transactions after leaving the goods market. We consider three standard specifications of preferences: the additively separable formulation, the Greenwood–Hercovitz–Huffman (GHH) (Greenwood et al., 1988) formulation and the King–Plosser–Rebelo (KPR) (King et al., 1988) formulation. First, we show that for all the three types of preferences, local indeterminacy occurs under the CIA timing with a low enough interest rate elasticity of money demand. Second, we show that with the CAM timing, although determinacy always holds under separable preferences, local indeterminacy can occur with GHH and KPR preferences. We thus prove that compared to aggregate models, two-sector models provide new rooms for local indeterminacy when non-separable standard preferences are considered.     

A remark on the existence of equilibria in markets without ordered preferences and with a Riesz space of commodities

We show the existence of competitive equilibria in economies without ordered preferences and a Hausdorff locally convex solid Riesz space of commodities. Our principal assumptions are that the commodity space has a predual and that its positive cone has a non-empty interior.     

Threshold preferences and the environment

In this article we study the implication of thresholds in preferences. To model this we extend the basic model of John and Pecchenino (1994) by allowing the current level of environmental quality to have a discrete impact on how an agent trades off future consumption and environmental quality. Thus, we endogenize the semi-elasticity of utility based on a step function. We find that for low (high) thresholds, environmental quality converges to a low (high) steady state. For intermediate levels it converges to a stable p-cycle, with environmental quality being asymptotically bounded below and above by the low and high steady state. As policy implications we study shifts in the threshold. Costless shifts of the threshold are always worthwhile. If it is costly to change the threshold, then it is worthwhile to change the threshold if the threshold originally was sufficiently low. Lump-sum taxes lead to a development trap and a proportional income tax should be preferred.     

On the uniqueness of local equilibria

The purpose of this paper is to define a new notion of local equilibrium in an exchange economy, where the consumers face lower bounds on net trades. Then, we show that the local equilibrium is unique if the lower bounds are closed enough to 0. By the way, we also provide a convergence result of local equilibrium price toward Walras equilibrium price of a suitable tangent linear economy.     

Number and definiteness of economic equilibria

The aim of this paper is to show that it is almost equivalent to know with accuracy the equilibria of every economy or simply to know just the number of equilibria of these economies.     

Real indeterminacy of equilibria and manipulability

In this paper, we analyze the indeterminacy of equilibria in financial markets and propose a selection mechanism. We suggest that there is one equilibrium that prevails over the others, as a result of the market power of the agents that some states of nature become monopolists of certain commodities. Given a financial assets model, we define a price game and show the existence of mixed strategies equilibria. Then we purify these equilibria by considering a price game with incomplete information.     

Note on the optimality of unemployment equilibria

An equilibrium concept for an economy with rigid prices has been given by Drèze (1975). He formulated a model where for some commodity, either the supplies or the demands are rationed. In this note we discuss ‘unemployment equilibria’, i.e., fixed price equilibria for which the quantity rationing affects the supplies only. It can be proved that there exists a set of unemployment equilibria. Therefore we consider the question whether it is possible to characterize the set of undominated unemployment equilibria.     

Efficiency of temporary equilibria

A temporary equilibrium model of a production economy with various capital markets in which producers maximize the expected utility of cash flows in various periods is considered. Without restricting the price expectation of producers, it is shown that, if contracts to buy or sell goods at future periods can be trated in a market and if the producer's utility functions are increasing in the cash flow of the first period, then the temporary equilibrium allocations are technically efficient. Also, production is technically efficient even in the presence of some quantity constraints on sales of futures contracts which are sufficient for existence of an equilibrium.     

Pseudocontinuous functions and existence of Nash equilibria

In topological spaces, we introduce a new class of functions (pseudocontinuous functions) and we present some characterizations and properties. In particular, we show that any preference relation endowed of utility functions is continuous if and only if any utility is pseudocontinuous. A maximum theorem is proved for such a class of functions and connections with similar results are investigated. Finally, the existence of Nash equilibria for games with pseudocontinuous payoffs is obtained.     

Rent control and complete contract equilibria

This paper develops a theoretical model for analysing the effects of rent control. The model incorporates the roles of optimal long-term contractual arrangements and the responses of individual agents to rent control in determining the economic characteristics of the controlled market equilibrium, and can help to explain the wide variation in empirical results observed across jurisdictions. Necessary and sufficient conditions for a complete contract equilibrium, where the characteristics of the competitive and controlled solutions are identical, are established. It is shown that housing quality, new construction, and the distribution of wealth may not be affected by rent control.     

Consumer preferences and demand systems

This paper is an up-to-date survey of the state-of-the-art in consumer demand modelling. We review and evaluate advances in a number of related areas, including different approaches to empirical demand analysis, such as the differential approach, the locally flexible functional forms approach, the semi-non-parametric approach, and a non-parametric approach. We also address estimation issues, including sampling theoretic and Bayesian estimation methods, and discuss the limitations of the currently common approaches. We also highlight the challenge inherent in achieving economic regularity, for consistency with the assumptions of the underlying neoclassical economic theory, as well as econometric regularity, when variables are nonstationary.     

Agricultural arbitrage and risk preferences

A structural intertemporal model of agricultural asset arbitrage equilibrium is developed and applied to agriculture in the North Central region of the US. The data are consistent with a unifying level of risk aversion. The levels of risk aversion are more plausible than previous estimates for agriculture. However, the standard arbitrage equilibrium is rejected; perhaps, this is due to the period and the shortness of the period studied.     

Community preferences and social choice

This paper gives necessary and sufficient conditions for the aggregation of preferences, extending an earlier treatment of aggregation by Stolper, Gorman, Samuelson and Chipman. Such aggregation procedures are intended to deal with the problem of aggregating demand functions in econometrics, where the aggregate is required to be independent to the income distribution. Thus, it is usually assumed in this form of aggregation that all consumers face the same prices, but that the distribution of income is unrestricted.In order to establish the characterisation result, we present a new approach to preference aggregation which involves summing certain subsets of the graphs of the preferences, viewed as subsets of a Euclidean space. This procedure has a clear geometrical interpretation, and a number of useful applications. In particular, it enables us to analyse the possibility of aggregation when prices are not constrained to be the same for all consumers, a case of possible empirical significance. We also show that the Stolper-Gorman-Samuelson-Chipman construction of community indifference curves coincides with a special case of this procedure.Finally, this approach allows us to develop the relationship between these forms of aggregation and the preference aggregation problem as it occurs in social choice theory.     

On dual regularity and value convergence theorems

We deal with the Value Convergence Problem in the piecewise smooth framework including the rates of convergence and the number of (symmetric) value allocations. In this connection, we also discuss the concept of dual regularity and give several equivalent ways of formulating the regularity conditions.     

Diversification preferences in the theory of choice

Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This corresponds to the notion of risk aversion when one assumes the von Neumann–Morgenstern expected utility model, but the equivalence fails to hold in other models. This paper analyzes axiomatizations of the concept of diversification and their relationship to the related notions of risk aversion and convex preferences within different choice theoretic models. Implications of these notions on portfolio choice are discussed. We cover model-independent diversification preferences, preferences within models of choice under risk, including expected utility theory and the more general rank-dependent expected utility theory, as well as models of choice under uncertainty axiomatized via Choquet expected utility theory. Remarks on interpretations of diversification preferences within models of behavioral choice are given in the conclusion.     

Revealing the preferences of the US Federal Reserve

We use Bayesian methods to estimate changes in US post‐war monetary policy in the Smets and Wouters model. We perform the estimations by allowing for a break in monetary policy at the time of Volcker's appointment as chairman. This enables us to capture changes in the monetary policy regime introduced by Volcker during the Volcker–Greenspan period. We find support for the assumption that monetary policy in the Volcker–Greenspan period performed optimally under commitment. Our estimation strategy allows us to estimate the preferences of the US Federal Reserve in the Volcker–Greenspan period, where the main objective of policy appears to be inflation, followed by interest rate stabilization, output growth and interest rate smoothing. We find that the Great Moderation of output growth is explained by a combination of two factors: the decrease in the volatility of the structural shocks and the improved monetary policy conduct. Inflation Stabilization, however, is mainly due to the change in monetary policy that took place at the beginning of Volcker's mandate. Copyright © 2010 John Wiley & Sons, Ltd.