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    69 - Incoherent Preferences

    G. Charles-Cadogan

    Under Bruno De Finetti’s coherence theory of additive probability, the expected value of a sequence of mutually exclusive bets should not expose the bettor to certain loss for any of the bets in the sequence (i.e. no formation of Dutch books). However, decision makers (DMs) are known to have non-additive probability preferences represented in the frequency domain. This conundrum of choice implies that DMs are incoherent. If so, then preference reversal (PR) is more likely to occur. That is, DMs response to choice and valuation procedures (with similar expected value) are more likely to be dissimilar or their preferences may appear to be intransitive. We prove that even when the true states of choice experiments are procedure invariance and transitive preferences, PR will still be observed because of: (1) phase incoherence between paired gambles with the same expected value–when probability cycles are incomplete, and (2) experimenter interference in probability measurement. We introduce a utility coherence ratio for paired gambles, and estimates from simulated phase transition from incoherent states to coherent states in binary choice to illustrate the theory. We find that coherence measures are very sensitive to measurement error, coherent states have higher frequency phase transition, and incoherent states represent momentary lapse in judgment that eventually disappear. So, Dutch books and PR are prevented.

    Date
    Friday, 19 March 2021
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    68 - Attack and Interception in Networks

    Francis Bloch, Kalyan Chatterjee and Bhaskar Dutta

    This paper studies a game of attack and interception in a network, where a single attacker chooses a target and a path, and each node chooses a level of protection. We show that the Nash equilibrium of the game exists and is unique. It involves a mixed strategy of the attacker except when one target has a very high value relative to others. We characterize equilibrium attack paths and attack distributions as a function of the underlying network and target values. We also show that adding a link or increasing the value of a target may harm the attacker - a comparative statics effect which is reminiscent of Braess's paradox in transportation economics. Finally, we contrast the Nash equilibrium with the equilibria of two variations of the model : one where nodes make sequential protection decisions upon observing the arrival of a suspicious object, and one where all nodes cooperate in defense.

    Date
    Monday, 15 March 2021
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    67 - Behavioural utilitarianism and distributive justice

    Giorgos Galanis and Roberto Veneziani

    What are the distributive implications of utilitarianism? Is it compatible with a concern for equality, as many utilitarians have argued? We analyse these questions in the context of a pure allocation problem. We consider an infinitely-lived economy and, drawing on the behavioural literature, assume that individuals have reference-dependent preferences: agents' utility is a function of current consumption and a reference point which captures consumption habits, or the agents' upbringing. Assuming a history of inequalities in consumption and welfare, we show that the utilitarian allocation is equalising: starting from an unequal distribution, consumption and welfare inequalities decrease over time at the utilitarian optimum. However, even though agents are in a relevant sense identical, equality does not obtain at any finite time.

    Date
    Friday, 16 October 2020
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    66 - Roberts' Weak Welfarism Theorem: A Minor Correction

    Peter J. Hammond

    Roberts' "weak neutrality" or "weak welfarism" theorem concerns Sen social welfare functionals which are de ned on an unrestricted domain of utility function pro les and satisfy independence of irrelevant alternatives, the Pareto condition, and a form of weak continuity. Roberts (1980) claimed that the induced welfare ordering on social states has a one-way representation by a continuous, monotonic real-valued welfare function defined on the Euclidean space of interpersonal utility vectors that is, an increase in this welfare function is sufficient, but may not be necessary, for social strict preference. A counter-example shows that weak continuity is insufficient; a minor strengthening to pairwise continuity is proposed instead and its sufficiency demonstrated.

    Date
    Tuesday, 13 October 2020
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    64 - Network Comparative Statics

    Andrew Harkins

    This paper develops a framework for analyzing the effect of arbitrary changes to network structure in linear-quadratic games on networks. Changes to network structure which increase total activity and total utility are studied for the case of strategic complements and strategic substitutes. Changes which are welfare increasing are found to depend on a new measure of centrality which counts the total length of walks from a node. Two optimal network design problems are then considered. Total activity is found to be a convex function of the edge weights of the network, which allows for convex optimization techniques to be applied to minimize total activity as in the traditional ‘key player’ problem. Welfare maximizing network structures are also studied and previous results which associate optimal networks with nested split graphs are generalized.

    Date
    Tuesday, 06 October 2020
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    63 - Cooperation in a State of Anarchy

    Abhinay Muthoo

    We lay down a simple (game-theoretic) model of a state-of-anarchy involving three players. We focus attention on the following question: Which subset of players (if any) will agree to cooperate amongst each other? Will all three players agree to do so, or only two of the three players (and if so, which two players)? Or will no player agree to cooperate with any other player? We show that the socially optimal outcome is for all three players to agree to cooperate with each other. We also show that due to the presence of positive externalities, in equilibrium, cooperation may only be established between two of the three players (which is sub-optimal).

    Date
    Thursday, 06 August 2020
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    62 - Surplus Bounds in Cournot Monopoly and Competition

    Daniele Condorelli and Balazs Szentes

    We characterize equilibria of oligopolistic markets where identical firms with constant marginal cost compete a’ la Cournot. For given maximal willingness to pay and maximal total demand, we first identify all combinations of equilibrium consumer and producer surplus that can arise from arbitrary demand functions. Then, as a further restriction, we fix the average willingness to pay above marginal cost (i.e., first best surplus) and identify all possible triples of consumer surplus, producer surplus and deadweight loss.

    Date
    Thursday, 30 July 2020
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    61- Convergence and divergence in dynamic voting with inequality

    Corrado Di Guilmi and Giorgos Galanis

    The original formulation of the median voter theorem predicts parties’ political convergence in a static setup, under two key assumptions : voters preferences being fixed and parties being opportunistic (purely office-motivated). Drawing on recent empirical findings about the evolution of voters’ political preferences, this paper verifies whether the median voter theorem’s results hold when (i) the control variables that influence voters’ preferences endogenously evolve over time, and (ii) parties are not opportunistic. We present a dynamic two-party voting model in which voters’ preferences evolve over time

    Date
    Tuesday, 28 July 2020
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    60 - Identification of preferences, demand and equilibrium with finite data

    F. Kubler R. Malhotra & H. Polemarchakis

    We give conditions under which an individual's preferences can be identified with finite data. First, we derive conditions that guarantee that a finite number of observations of an individual's binary choices identify preferences over an arbitrarily large subset of the choice space and allow one to predict how the individual shall decide when faced with choices not previously encountered. Second, we extend the argument to observations of individual demand. Finally, we show that finitely many observations of Walrasian equilibrium prices and profiles of individual endowments suffice to identify individual preferences and, as a consequence, equilibrium comparative statics.

    Date
    Monday, 27 July 2020
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    59 - Liberal parentalism

    A. Heifetz, E. Minelli & H. Polemarchakis

    What normative constraints should bind parents (or policy makers) if they intervene in the choices of children (or constituencies) whose preferences evolve over time? For a sophisticated child who anticipates correctly his preference change, we prove that generically there exist parental interventions that are Pareto improving over the backward induction path that the child will follow on his own. If, in contrast, the child misperceives his future preferences, Pareto improving interventions might not exist, and even nudges might be painfully sobering. The parent may then choose to minimize the maximal disappointment along time that her benevolent intervention would cause.

    Date
    Sunday, 26 July 2020
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    58 - A Behavioural SIR Model and its Implications for Physical Distancing

    Corrado Di Guilmi , Giorgos Galanis , Giorgos Baskozos

    The paper proposes a behavioural-compartmental-epidemiological model with heterogenous agents who choose whether to enact physical distancing practices. Motivated by the evidence on individual physical distancing behaviour during the COVID-19 outbreak, our model extends the standard compartmental-epidemiological models by including endogenous physical distancing behaviour, drawing on discrete choice theory. This approach can account for two important factors : (i) the limited information about the contagion dynamics available for individuals and (ii) the heterogeneity in the individual ability and preferences concerning physical distancing. Despite its simplicity, the model provides policy indications about the timing and size of mitigating policies and the level and quality of information available for the public.

    Date
    Tuesday, 02 June 2020
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    57 - Social distancing and contagion in a discrete choice model of COVID-19

    Giorgos Baskozos, Giorgos Galanis & Corrado Di Guilmi

    We present an epidemic model in which heterogenous agents choose whether to enact social distancing practices. The policy maker decides on the timing and the extent of policies that incentivise social distancing. We evaluate the consequences of interventions and find that: (i) the timing of intervention is paramount in slowing the contagion, and (ii) a delay cannot be compensated by stronger measures.

    Date
    Saturday, 11 April 2020
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    56 - Lords and Vassals: Power, Patronage, and the Emergence of Inequality

    Robert Akerlof, Hongyi Li, and Jonathan Yeo

    This paper uses a laboratory experiment to study competitions for power — and the role of patronage in such competitions. We construct and analyze a new game — the “chicken-and-egg game” — in which chickens correspond to positions of power and eggs are the game’s currency. We find that power tends to accumulate, through a “power begets power” dynamic, in the hands of “lords.” Other subjects behave like their vassals in the sense that they take lords’ handouts rather than compete against them. We observe substantial wealth inequality as well as power inequality. There are also striking gender differences in outcomes — particularly in rates of lordship. In a second treatment, where we eliminate patronage by knocking out the ability to transfer eggs, inequality is vastly reduced and the “power begets power” dynamic disappears

    Date
    Tuesday, 10 March 2020
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    55 - Fundamental Utilitarianism and Intergenerational Equity with Extinction Discounting

    Graciela Chichilnisky, Peter J. Hammond & Nicholas Stern

    Ramsey famously condemned discounting “future enjoyments” as “ethically indefensible”. Suppes enunciated an equity criterion which, when social choice is utilitarian, implies giving equal weight to all individuals’ utilities. By contrast, Arrow (1999a, b) accepted, perhaps reluctantly, what he called Koopmans’ (1960) “strong argument” implying that no equitable preference ordering exists for a sufficiently unrestricted domain of infinite utility streams. Here we derive an equitable utilitarian objective for a finite population based on a version of the Vickrey–Harsanyi original position, where there is an equal probability of becoming each person. For a potentially infinite population facing an exogenous stochastic process of extinction, an equitable extinction biased original position requires equal conditional probabilities, given that the individual’s generation survives the extinction process. Such a position is well-defined if and only if survival probabilities decline fast enough for the expected total number of individuals who can ever live to be finite. Then, provided that each individual’s utility is bounded both above and below, maximizing expected “extinction discounted” total utility — as advocated, inter alia, by the Stern Review on climate change — provides a coherent and dynamically consistent equitable objective, even when the population size of each generation can be chosen.

    Date
    Monday, 30 December 2019
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    54 - Monte Carlo Sampling Processes and Incentive Compatible Allocations in Large Economies

    Peter J. Hammond, Lei Qiao & Yeneng Sun

    Monte Carlo simulation is used in [13] to characterize a standard stochastic framework involving a continuum of random variables that are conditionally independent given macro shocks. This paper presents some general properties of such Monte Carlo sampling processes, including their one-way Fubini extension and regular conditional independence. In addition to the almost sure convergence of Monte Carlo simulation considered in [13], here we also consider norm convergence when the random variables are square integrable. This leads to a necessary and sufficient condition for the classical law of large numbers to hold in a general Hilbert space. Applying this analysis to large economies with asymmetric information shows that the conflict between incentive compatibility and Pareto efficiency is resolved asymptotically for almost all sampling economies, corresponding to some results in [21] and [24].

    Date
    Thursday, 07 November 2019
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    53 - A Game of Hide and Seek in Networks

    Francis Bloch, Bhaskar Dutta and Marcin Dziubinski

    We propose and study a strategic model of hiding in a network, where the network designer chooses the links and his position in the network facing the seeker who inspects and disrupts the network. We characterize optimal networks for the hider, as well as equilibrium hiding and seeking strategies on these networks. We show that optimal networks are either equivalent to cycles or variants of a core-periphery networks where every node in the periphery is connected to a single node in the core.

    Date
    Monday, 21 October 2019
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    52 - Experimentation in Dynamic R&D Competition

    Anastasios Dosis & Abhinay Muthoo

    We study a two-stage, winner-takes-all, R&D race, in which, at the outset, firms are uncertain regarding the viability of the project. Learning through experimentation introduces a bilateral (dynamic) feedback mechanism. For relatively low-value products, the equilibrium stopping time coincides with the socially efficient stopping time although firms might experiment excessively inequilibrium; for relatively high-value products, firms might reduce experimentation and stop rather prematurely due to the fundamental free-riding effect. Perhaps surprisingly, a decrease in the value of the product can spur experimentation.

    Date
    Thursday, 11 July 2019
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    51 - Externalities and financial crisis – enough to cause collapse?

    Marcus Miller and Lei Zhang

    After the boom in US subprime lending came the bust - with a run on US shadow banks. The magnitude of boom and bust were, it seems, amplified by two significant externalities triggered by aggregate shocks: the endogeneity of bank equity due to mark-to-market accounting and of bank liquidity due to ‘fire-sales’ of securitised assets. We show how adding a systemic ‘bank run’ to the canonical model of Adrian and Shin allows for a tractable analytical treatment - including the counterfactual of complete collapse that forces the Treasury and the Fed to intervene.

    Date
    Wednesday, 03 July 2019
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    50 - Interview of Peter J. Hammond

    Philippe Mongin, GREGHEC, Paris

    Following an initiative of Social Choice and Welfare, this is the result of an interview conducted by email exchange during the period from July 2017 to February 2018, with minor adjustments later in 2018. Apart from some personal history, topics discussed include: (i) social choice, especially with interpersonal comparisons of utility; (ii) utilitarianism, including Harsanyi’s contributions; (iii) consequentialism in decision theory and in ethics; (iv) the independence axiom for decisions under risk; (v) welfare economics under uncertainty; (vi) incentive compatibility and strategy-proof mechanisms, especially in large economies; (vii) Pareto gains from trade, and from migration; (viii) cost–benefit analysis and welfare measurement; (ix) the possible future of normative economics.

    Date
    Thursday, 31 January 2019
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    49 - The dynamics of inequalities and unequal exchange of labor in intertemporal linear economies

    Giorgos Galanis, Roberto Veneziani & Naoki Yoshihara

    Introducing a concept of fairness of economic allocations, namely exploitation as the unequal exchange of labor (henceforth, UE exploitation) by generalizing Roemer’s [51, 52] seminal model, this paper aims to answer the following two questions in the context of an intertemporal economy with linear technology: How is income and wealth inequality related (or unrelated) to the existence and persistence of UE exploitation? What are the mechanisms driving the persistent existence of UE exploitation in growing economies? Agents are UE exploited (resp. exploiters) if the amount of labor that they contribute to the economy is smaller (resp. bigger) than the amount of labor ‘received’ by them via their income. It is proved, first, that UE exploitation is monotonically correlated to functional income inequality. Second, it is shown that, unless agents discount the future, asset inequalities are necessary, but not sufficient for the persistence of UE exploitation, and the capital accumulation leading to the disappearance of UE exploitation cannot be ruled out in equilibrium. Third, it is shown that, regardless of whether agents discount the future, labor-saving technical progress may yield sustained growth with persistent UE exploitation by keeping labor abundant relative to capital, which restrains wages from rising. Unlike in models with differentiable production functions, this mechanism does not rely on changes in the marginal productivity of inputs and it is entirely driven by the interaction between innovation and labor markets.

    Date
    Monday, 31 December 2018
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    48 - Wrongful Conviction, Persuasion and Loss Aversion

    Matthew J Robertson

    When can a prosecutor persuade a loss-averse judge to increase her rate of conviction? Motivated by empirical evidence, I study a model of persuasion in which the loss a judge incurs from wrongful conviction looms larger than the gain from a just verdict. I show that, surprisingly, the prosecutor benefits from persuasion even when the judge is extremely loss-averse. However, a necessary condition is that the prosecutor does not underestimate the judge’s loss aversion. I draw on experimental findings to quantify the effectiveness of persuasion under loss aversion.

    Date
    Wednesday, 05 December 2018
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    47 - Contests with Ex-Ante Target Setting

    Matthew J. Robertson

    I study contests in which each player is ranked by a scoring rule based on both her performance and how close this performance is to a private target, set before the contest. Each player’s decision problem is to choose her target when performance is subject to a random component. I analyse the incentive properties of target setting, derive conditions on the primitives such that equilibria exist and characterise the players’ behaviour. I show that target setting generates outcome uncertainty under a large class of conditions. In particular, neither private abilities nor perfectly correlated states are necessary. Target setting, therefore, has important implications in contest design as outcome uncertainty is a salient determinant of consumers’ demand for contests.

    Date
    Tuesday, 04 December 2018
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    46 - The Race to the Base

    Dan Bernhardt, Peter Buisseret & Sinem Hidir

    We study multi-district legislative elections between two office-seeking parties when the election pits a relatively strong party against a weaker party ; when each party faces uncertainty about how voter preferences will evolve during the campaign; and, when each party cares not only about winning a majority, but also about its share of seats in the event that it holds majority or minority status. When the initial imbalance favoring one party is small, each party targets the median voter in the median district, in pursuit of a majority. When the imbalance is moderate, the advantaged party continues to hold the centre-ground, but the disadvantaged party retreats to target its core supporters; it does so to fortify its minority share of seats in the likely event that it fails to secure a majority. Finally, when the imbalance is large, the advantaged party advances toward its opponent, raiding its moderate supporters in pursuit of an outsized majority.

    Date
    Wednesday, 17 October 2018
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    45 - Sustainable Debt

    Gaetano Bloise, Herakles Polemarchakis & Yiannis Vailakis

    Debt is sustainable at a competitive equilibrium due solely to the reputation of debtors for repayment; that is, even absent collateral or legal sanctions available to creditors. Under incomplete markets, when the rate of interest (net of growth) is recurrently negative, self-insurance is more costly than borrowing, and repayments on loans are enforced by he implicit threat of loss of risk-sharing advantages of debt contracts. Private debt credibly circulates as a form of inside money and, in general, is not valued as a speculative bubble; it is distinct from outside money. Competitive equilibria with self-enforcing debt exist under a suitable hypothesis of gains from trade.

    Date
    Monday, 15 October 2018
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    44 - Designing Communication Hierarchies

    Dimitri Migrow

    A manager aims to elicit employees’ information by designing a hierarchical communication network. She decides who communicates with whom, and in which order, where communication takes the form of “cheap talk” (Crawford and Sobel, 1982) and the information structure is beta-binomial. The optimal network is shaped by two competing forces: an intermediation force that calls for grouping employees together and an uncertainty force that favours separating them. The manager optimally divides employees into groups of similar bias. Under simple conditions on biases and a uniform prior, the optimal network features a single intermediary who communicates directly to the manager

    Date
    Friday, 12 October 2018
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    43 - Should We Discount the Welfare of Future Generations? Ramsey and Suppes versus Koopmans and Arrow

    Graciela Chichilnisky, Peter J. Hammond & Nicholas Stern

    Ramsey famously pronounced that discounting “future enjoyments” would be ethically indefensible. Suppes enunciated an equity criterion implying that all individuals’ welfare should be treated equally. By contrast, Arrow (1999a, b) accepted, perhaps rather reluctantly, the logical force of Koopmans’ argument that no satisfactory preference ordering on a sufficiently unrestricted domain of infinite utility streams satisfies equal treatment. In this paper, we first derive an equitable utilitarian objective based on a version of the Vickrey–Harsanyi original position, extended to allow a variable and uncertain population with no finite bound. Following the work of Chichilnisky and others on sustainability, slightly weakening the conditions of Koopmans and co-authors allows intergenerational equity to be satisfied. In fact, assuming that the expected total number of individuals who ever live is finite, and that each individual’s utility is bounded both above and below, there is a coherent equitable objective based on expected total utility. Moreover, it implies the “extinction discounting rule” advocated by, inter alia, the Stern Review on climate change.

    Date
    Friday, 24 August 2018
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    42 - Allocation Mechanisms, Incentives, and Endemic Institutional Externalities

    Peter J Hammond

    Whether an economic agent's decision creates an externality often depends on the institutional context in which the decision was made. Indeed, in orthodox economics, a technological or exogenous externality occurs just in case one agent's economic welfare or production possibilities are directly affected by the market decisions of other agents. A pecuniary externality occurs just in case one consumer's economic welfare or producer's profit is affected indirectly by price changes caused by changes in other agents' decisions. Similarly, an institutional or endogenous externality may arise whenever allocations are determined by a mechanism that is not strategyproof for some agent. Then even a resource balance constraint creates an institutional externality except in special cases such as when no individual agent's action can affect market clearing prices - i.e., there are no pecuniary externalities.

    Date
    Tuesday, 03 April 2018

    41 - Efficient Partnership Information in Networks

    Francis Bloch, Bhaskar Dutta & Mihai Manea

    We analyze the formation of partnerships in social networks. Players need favors at random times and ask their neighbors in the network to form exclusive long-term partnerships that guarantee reciprocal favor exchange. Refusing to provide a favor results in the automatic removal of the underlying link. When favors are costly, players agree to provide the first favor in a partnership only if they otherwise face the risk of eventual solitude. In equilibrium, the players essential for realizing every maximum matching can avoid this risk and enjoy higher payoffs than inessential players. Although the search for partners is decentralized and reflects local incentives, the strength of essential players drives efficient partnership formation in every network. When favors are costless, players enter partnerships at any opportunity and every maximal matching can emerge in equilibrium. In this case, efficiency is limited to special linking patterns: complete and complete bipartite networks, locally balanced bipartite networks with positive surplus, and factor-critical networks.

    Date
    Tuesday, 13 February 2018
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    40 - The social value of information in economies with mandatory savings

    Pablo F. Beker & Conrado Cuevas

    We study the value of public information in a stochastic exchange economy where agents trade assets to reallocate risk and mandatory (retirement) savings imposes a lower bound on the market value of some agents' holdings of a nancial asset. Since equilibrium prices depend on the agents' beliefs about the states of nature, the arrival of information shifts the agents' mandatory savings constraints. We show that the arrival of public information can generate an ex-ante Pareto improvement relative to an uninformative equilibrium even when ex-post improvements are not possible.

    Date
    Wednesday, 31 January 2018
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    39 - The measurement of welfare change

    Walter Bossert & Bhasker Dutta

    We propose and characterize a class of measures of welfare change that are based on the generalized Gini social welfare functions. In addition, we analyze these measures in the context of a second-order dominance property that is akin to generalized Lorenz dominance as introduced by Shorrocks (1983) and Kakwani (1984). Because we consider welfare differences rather than welfare levels, the requisite equivalence result involves linear welfare functions (that is, those associated with the generalized Ginis) only, as opposed to the entire class of strictly increasing and S-concave welfare indicators. Journal of Economic

    Date
    Tuesday, 23 January 2018
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    38 - Ignoring Good Advice

    David Ronayne and Daniel Sgroi

    We present results from an experiment involving 1,500 participants on whether, when and why good advice is ignored, focusing on envy and stubbornness. Participants performance in skill-based and luck-based tasks generated a probability of winning a bonus. About a quarter ignored advice that would have increased their chance of winning. Good advice was followed less often when the adviser was relatively highly remunerated or the task was skill-based. More envious advisees took good advice more often in the skill-based task, but higher adviser remuneration significantly reduced this effect. Susceptibility to the sunk cost fallacy reduced the uptake of good advice. (Revised March 2018)

    Date
    Thursday, 18 January 2018
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    37 - Self-Control in the Retailing Industry: Inducing Rejection of Loyalty Schemes

    Matteo Foschi

    When consumers register with loyalty schemes, or open a 'customer account', offered by large retailers, they allow retailers to study their purchasing behaviour over time. Via personalised offers and discounts, retailers can then use this information to price discriminate. I study the effect on consumer welfare of this discrimination, assuming several different levels of informativeness within the schemes. When schemes are uninformative about consumer preferences they are certain to hurt consumer surplus. When they are fully or partially informative, an increase in aggregate consumer surplus can take place under some conditions. Pareto improvements are never possible. The model studies groceries and online industries where temptation and self-control are an issue.

    Date
    Thursday, 30 November 2017
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    36 - Information Acquisition and Credibility in Cheap Talk

    Sinem Hidir

    This paper explores the interaction between uncertain bias and endogeneous information acquisition in strategic communication. I consider an expert who is privately informed about his bias as well as about whether he is informed, in addition can also engage in costly information acquisition. In this setup, information acquisition simultaneously serves the purposes of getting informed and increasing credibility before communicating through cheap talk to a decision maker. I define the signaling and the intrinsic value of information and find the conditions under which a separating equilibrium can arise, which is the most informative as well as the welfare maximizing equilibrium. I solve for equilibria as a function of cost of information acquisition and show that communication is most precise with an initially uninformed expert at an intermediary cost value. The overall welfare is non-monotone in cost, and it increases when cost increases to enable separation. When covert information acquisition is considered, there is a tradeoff between less wasteful investment versus less communication precision compared to the overt case.

    Date
    Thursday, 31 August 2017
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    35 - Information Revelation and Coordination Using Cheap Talk in a Game with Two-Sided Private Information

    Chirantan Ganguly & Indrajit Ray

    We consider a Bayesian game, namely the Battle of the Sexes with private information, in which each player has two types, High and Low. We allow cheap talk regarding players’ types before the game. We prove that the unique fully revealing symmetric cheap talk equilibrium exists (for a low range of prior probability of the High-type) and has a desirable type-coordination property: it fully coordinates on the ex-post efficcient pure Nash equilibrium when the players’ types are different. Type-coordination is also obtained in a partially revealing equilibrium in which only the High-type is not truthful, for a medium range of prior probability of the High-type. We also prove that there is no (non-babbling) truthful cheap talk equilibrium if only one player talks.

    Date
    Thursday, 03 August 2017
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    34 - Partition Equilibria in a Japanese-English Auction with Discrete Bid Levels for the Wallet Game

    Ricardo Gonçalves & Indrajit Ray

    We consider the set-up of a Japanese-English auction with exogenously fixed discrete bid levels for the wallet game with two bidders, following Gonçalves and Ray (2017). We show that in this auction, partition equilibria exist that may be separating or pooling. We illustrate some separating and pooling equilibria with two and three discrete bid levels. We also compare the revenues of the seller from these equilibria and thereby find the optimal choices of bid levels for these cases.

    Date
    Wednesday, 02 August 2017
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    33 - Coalition Formation and History Dependence

    Bhaskar Dutta & Hannu Vartiainen

    Farsighted formulations of coalitional formation, for instance by Harsanyi (1974) and Ray and Vohra(2015), have typically been based on the von Neumann-Morgenstern (1944) stable set. These farsighted stable sets use a notion of indirect dominance in which an outcome can be dominated by a chain of coalitional ‘moves’ in which each coalition that is involved in the sequence eventually stands to gain. Dutta and Vohra(2016) point out that these solution concepts do not require coalitions to make optimal moves. Hence, these solution concepts can yield unreasonable predictions. Dutta and Vohra (2016) restricted coalitions to hold common, history independent expectations that incorporate optimality regarding the continuation path. This paper extends the Dutta-Vohra analysis by allowing for history dependent expectations. The paper provides characterization results for two solution concepts corresponding to two versions of optimality. It demonstrates the power of history dependence by establishing nonemptyness results for all finite games as well as transferable utility partition function games. The paper also provides partial comparisons of the solution concepts to other solutions.

    Date
    Monday, 24 July 2017
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    32 - Information Acquisition and Use by Networked Players

    David P. Myatt & Chris Wallace

    In an asymmetric coordination (or anti-coordination) game, players acquire and use signals about a payoff-relevant fundamental from multiple costly information sources. Some sources have greater clarity than others, and generate signals that are more correlated and so more public. Players wish to take actions close to the fundamental but also close to (or far away from) others’ actions. This paper studies how asymmetries in the game, represented as the weights that link players to neighbours on a network, affect how they use and acquire information. Relatively centrally located players (in the sense of Bonacich, when applied to the dependence of players’ payoffs upon the actions of others) acquire fewer signals from relatively clear information sources; they acquire less information in total; and they place more emphasis on relatively public signals.

    Date
    Thursday, 20 July 2017
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    31 - Cheap Talk with Strategic Substitutability

    Raghul S Venkatesh

    In the classic Crawford-Sobel (CS) model of strategic communication between an informed Sender and uninformed Receiver, perfect information transmission is never achieved as an equilibrium outcome. I present a modified version of the CS cheap talk game with the following two innovations : (i) both players take actions, and (ii) actions are strategic substitutes. In contrast to the CS setup, the modified game can facilitate perfect information revelation. I characterize the conditions under which a full information revelation equilibrium exists. When these conditions are violated, only partial revelation equilibria exist. Under partial revelation, the Sender reveals information up to a threshold state and pools beyond this threshold, resulting in some loss of information. Welfare analysis suggests that partial revelation equilibria with a higher threshold pareto dominate those with lower thresholds. Crucially, a higher threshold equilibrium is also interim efficient – every Sender type at least weakly prefers this over a lower threshold equilibrium.

    Date
    Tuesday, 20 June 2017
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    30 - Activism, Costly Participation, and Polarization

    Raghul S Venkatesh

    I develop a model of activism and polarization in the context of electoral competition. Two candidates imultaneously announce policy platforms and seek the support of ideologically inclined activists. Activists compete to influence electoral outcomes by expending costly support for their respective candidates. The presence of activists always moderates the platform choice of candidates, compared to the case of no activism. The main finding is to provide conditions under which as activists’ ideological partisanship increases (decreases), polarization of candidate platforms reduces (widens) - meaning candidates may compromise even though their supporters become more extreme. I precisely characterize the conditions under which the presence of activism and increasing partisanship among activists are both welfare-improving for voters. Finally, I identify a novel crowding out effect of big money on the demand for activism. My analysis suggests public funding of elections as an important institutional reform that could mitigate the pernicious effects of high polarization.

    Date
    Wednesday, 31 May 2017
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    29 -Skewness, Tax Progression, and Demand for Redistribution: Evidence from the UK

    Kirill Pogorelskiy & Stefan Traub

    We introduce a skewness-based approach to measure tax progression and demand for redistribution. Adapting a novel, quantile-based statistical measure of skewness to right-skewed income distributions, we uncover its political economy foundation, by simultaneously relating the same measure to the classical model of income redistribution due to Meltzer and Richard (1981), to the Prospect Of Upward Mobility (POUM) mechanism due to Benabou and Ok (2001), and to the progressivity of a tax schedule. In an empirical analysis of UK income distributions in 1979 - 2013, we find that skewness has increased over time, with the rich moving further away from the median. While the magnitude of the increase has remained small enough so that observed redistribution (or lack thereof ) could be consistent with POUM hypothesis, more recent periods show an increase in tax progression.

    Date
    Tuesday, 25 April 2017
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    28 - The identification of attitudes towards ambiguity and risk from asset demand

    Herakles Polemarchakis, Larry Selden & Xinxi Song

    Individuals behave differently when they know the objective probability of events and when they do not. The smooth ambiguity model accommodates both ambiguity (uncertainty) and risk. For an incomplete, competitive asset market, we develop a revealed preference test for asset demand to be consistent with the maximization of smooth ambiguity preferences ; and we show that ambiguity preferences constructed from finite observations converge to underlying ambiguity preferences as observations become dense. Subsequently, we give sufficient conditions for the asset demand generated by smooth ambiguity preferences to identify the ambiguity and risk indices as well as the ambiguity probability measure. We do not require ambiguity beliefs to be observable : in a generalized specification, they may not even be defined. An ambiguity free asset plays an important role for identification.

    Date
    Monday, 27 March 2017
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    27 - The Formation of Partnerships in Social Networks

    Francis Bloch, Bhaskar Dutta, Stéphane Robin & Min Zhu

    This paper analyzes the formation of partnerships in social networks. Agents randomly request favors and turn to their neighbors to form a partnership. If favors are costly, agents have an incentive to delay the formation of the partnership. In that case, for any initial social network, the unique Markov Perfect equilibrium results in the formation of the maximum number of partnerships when players become infinitely patient. If favors provide benefits, agents rush to form partnerships at the cost of disconnecting other agents and the only perfect initial networks for which the maximum number of partnerships are formed are the complete and complete bipartite networks. The theoretical model is tested in the lab. Subjects generally play according to their equilibrium strategy and the efficient outcome is obtained over 78% of the times. Decisions are affected by the complexity of the network. Two behavioral rules are observed during the experiment: subjects accept the formation of the partnership too often and reject partnership offers when one of their neighbors is only connected to them.

    Date
    Wednesday, 04 January 2017
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    26 - Regulation of trades based on differences in beliefs

    Hervé Crès & Mich Tvede

    Some trades based on differences in beliefs might cause more harm than good. Should they be restricted? If yes, how? We propose three limits on regulation aimed at protecting beneficial trades: Unanimity – the regulator should not object to trades with identical beliefs; Autarky – if the regulator does not object to two unrelated trades, both with identical beliefs, then it should not object to the mere juxtaposition of the trades; and, Independence of Irrelevant Agents – the regulator should consider solely the agents involved in the trade. We show that there is a unique policy within these three limits: Laissez-faire.

    Date
    Wednesday, 07 December 2016
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    25 - Show me your competitors and I will tell you if you are exposed : Market Structure and Foreign Exchange Exposure

    Athanasios Andrikopoulos & Xeni Dassiou

    We examine the impact of exchange rates on profits and prices in differentiated consumable goods markets under imperfect competition. We model the exchange rate exposure of exporting firms operating within price and quantity settings where between and within competition co-exist. We show that these two forms of competition may act as opposing forces in terms of the impact of the exchange rate on the optimal prices (quantities) and profits in both Bertrand and Cournot models. Real and bilateral exchange rate exposure is empirically tested using stock price and profit data from twenty-two multinational firms from nine markets during 1984-2015.

    Date
    Thursday, 01 September 2016
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    24 - Persuasion and Pricing : Dynamic Trading with Hard Evidence

    Peter Eso & Chris Wallace

    In a simple trading game the buyer and seller have repeated opportunities to acquire and disclose hard (verifiable) evidence about the value of the tradable good. The parties disclose individually favourable information but conceal signals which are beneficial to the other side. In a leading case of interest with a finite horizon and sufficiently patient players, the equilibrium is characterized by a period of skimming (in which the seller makes offers acceptable only to informed buyers) concluded by a single settling period in which agreement is reached for sure. The length of delay until agreement and the corresponding efficiency loss are decreasing in the time horizon and in the abilities of the trading parties to identify the good’s value, but increasing in impatience. An arbitrarily long time horizon can generate either immediate agreement or no trade between uninformed parties.

    Date
    Wednesday, 03 August 2016
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    23 - Targeted socialization and production

    Facundo Albornoz, Antonio Cabrales & Esther Hauk

    We study a model that integrates productive and socialization efforts with network choice and parental investments. We characterize the unique symmetric equilibrium of this game. Individuals underinvest in productive and social effort. However, solving only the investment problem can exacerbate the misallocations due to network choice, to the point that in the presence of congestion eects the intervention may generate an even lower social welfare than no intervention at all. We also study the interaction of parental investment with network choice. In many scenarios, intergenerational transmission of abilities leads to a tendency towards to conformism, which aggravates potential problems of network overpopulation. We relate our equilibrium results with the existing evidence on parental occupational transmission.

    Date
    Tuesday, 07 June 2016
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    22 - The One-way Fubini Property and Conditional Independence : An Equivalence Result

    Peter J. Hammond & Yeneng Sun

    A general parameter process defined by a continuum of random variables is not jointly measurable with respect to the usual product sigma-algebra. For the case of independent random variables, a one-way Fubini extension of the product space was constructed in our 2006 paper (“Joint measurability and the one-way Fubini property for a continuum of independent random variables”, Proceedings of the American Mathematical Society, 134: 737–747) to satisfy a limited form of joint measurability. For the general case we show that this extension exists if and only if there is a countably generated sigma-algebra given which the random variables are essentially pairwise conditionally independent, while their joint conditional distribution also satisfies a suitable joint measurability condition. Applications include new characterizations of essential pairwise independence and essential pairwise exchangeability through regular conditional distributions with respect to the usual product sigma-algebra in the framework of a one-way Fubini extension.

    Date
    Monday, 25 April 2016
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    21 - Extreme Idealism and Equilibrium in the Hotelling-Downs Model of Political Competition

    David Ronayne

    In the classic Hotelling-Downs model of political competition there is (almost always) no pure strategy equilibrium with three or more potential strategic candidates where the distribution of voters’ preferred policies are single-peaked. I study the effect of introducing two idealist candidates who are non-strategic (i.e., fixed to their policy platform), to an unlimited number of potential strategic entrants. I present results that hold for a non-degenerate class of cases : (i) For any equilibrium, it must be that the left-most and right-most candidates (i.e., extremists) are idealists; (ii) Hotelling’s Law fails : in any equilibrium, candidates do not share their policy platforms, which instead are spread out across the policy space; (iii) Characterizations for symmetric and asymmetric single-peaked distributions of voters’ ideal policy preferences. Equilibria where many strategic candidates enter exist only if the distribution of voter preferences is asymmetric.

    Date
    Friday, 15 April 2016
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    20 - Fairness and Utilitarianism without Independence

    Sinong Ma & Zvi Safra

    In this work we reconsider Harsanyi’s celebrated (1953, 1955, 1977) utilitarian impartial observer theorem. Departing from Harsanyi’s individual-centered approach, we argue that, when societal decisions are at stake, postulates must not be drawn from individualistic behavior. Rather, they should be based on societal norms. Hence, notions like societal fairness should explicitly be taken as the guiding principles. Continuing this line of thinking, we state and prove a utilitarian result that, rather than the independence assumption, is based on the notion of procedural fairness and on similar treatment of societal and individual lotteries.

    Date
    Wednesday, 09 March 2016
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    19 - Rational Dialogs

    Herakles Polemarchakis

    Eventual consensus is the only property of a rational dialog.

    Date
    Wednesday, 24 February 2016
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    18 - Optimal leverage and strategic disclosure

    Giulio Trigilia

    Firms seeking external financing jointly choose what securities to issue, and the extent of their disclosure commitments. The literature shows that enhanced disclosure reduces the cost of financing. This paper analyses how disclosure affects the optimal composition of financing means. It considers a market where firms compete for external financing under costly-state-verification, but,in contrast to the standard model : (i) the degree of asymmetric information between firms and outside investors is variable, and (ii) firms can affect it through a disclosure policy, modeled as a verifiable signal with a cost decreasing in its noise component. Two central predictions emerge. On the positive side, optimal disclosure and leverage are negatively correlated. Efficient equity financing requires that firms are sufficiently transparent, whereas debt does not; it solely relies on the threat of bankruptcy and liquidation. Therefore, more transparent firms issue cheaper equity and face a higher opportunity cost of leveraged external financing. The prediction is shown to be consistent with the behavior of US corporations since the 1980s. On the normative side, disclosure externalities and time inconsistencies lead to under-disclosure and excessive leverage relative to the constrained best. If mandatory disclosures are feasible { that is, they cannot be easily dodged { they increase welfare. Otherwise, endogenously higher transparency can be triggered if regulators set capital requirements. Capital regulation proves especially useful when (i) firm performances are highly correlated, and (ii) disclosure requirements can be easily dodged { conditions that seem to apply to large financial firms. The view of capital standards as a means to improve the information environment is novel in the literature; its policy implications and challenges are discussed.

    Date
    Friday, 29 January 2016
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    17 - Herding and Contrarian Behavior in Financial Markets : An Experimental Analysis

    Andreas Park & Daniel Sgroi

    We analyze and confirm the existence and extent of rational informational herding and rational informational contrarianism in a financial market experiment, and compare and contrast these with equivalent irrational phenomena. In our study, subjects generally behave according to benchmark rationality. Traders who should herd or be contrarian in theory are the signicant sources of both within the data. Correcting for subjects who can be identified as less rational increases our ability to predict herding or contrarian behavior considerably.

    Date
    Wednesday, 27 January 2016
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    16 - Designing a Strategy-Proof Spot Market Mechanism with Many Traders : Twenty-Two Steps to Walrasian Equilibrium

    Peter J. Hammond

    To prove their Walrasian equilibrium existence theorem, Arrow and Debreu (1954) devised an abstract economy that Shapley and Shubik (1977) cricitized as a market game because, especially with untrustworthy traders, it fails to determine a credible outcome away from equilibrium. All this earlier work also postulated a Walrasian auctioneer with complete information about traders' preferences and endowments. To ensure credible outcomes, even in disequilibrium, warehousing is introduced into a multi-stage market game. To achieve Walrasian outcomes in a large economy with incomplete information, even about traders' endowments, a strategy-proof demand revelation mechanism is considered, and then extended to include warehousing.

    Date
    Tuesday, 26 January 2016
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    15 - Sovereign Debt and Incentives to Default with Uninsurable Risks

    Gaetano Bloise, Herakles M. Polemarchakis and Yiannis Vailakis

    Sovereign debt is not sustainable even in the presence of uninsurable risks; which extends the result of Bulow and Rogoff (1989). But the argument is not as general. Indeed, examples show that positive borrowing may be enforced even though the sovereign’s natural debt limits, corresponding to the most pessimistic evaluation of future endowment, are finite. Unsustainable sovereign debt in incomplete asset markets requires a strong version of high implied interest rates: the value of the most optimistic evaluation of future endowment is finite

    Date
    Friday, 15 January 2016
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    14 - An Argument for Positive Nominal Interest

    Gaetano Bloise & Herakles Polemarchakis

    In a dynamic economy, money provides liquidity as a medium of exchange. A central bank that sets the nominal rate of interest and distributes its profit to shareholders as dividends is traded in the asset market. A nominal rates of interest that tend to zero, but do not vanish, eliminate equilibrium allocations that do not converge to a Pareto optimal allocation.

    Date
    Thursday, 31 December 2015
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    13 - Suboptimality with Land

    Nikos Kokonas & Herakles Polemarchakis

    In a stochastic economy of overlapping generations subject to uninsurable risks, competitive allocations need not be constrained optimal. This is the case even in the presence of long-lived assets and no short sales.

    Date
    Wednesday, 30 December 2015

    12 - Short Sales, Destruction of Resources, Welfare

    Nikos Kokonas & Herakles Polemarchakis

    A reduction in the output of productive assets (trees) in some states of the world can expand the span of payoffs of assets; and, improved risk sharing may compensate for the loss of output and support a Pareto superior allocation. Surprisingly, if short sales of assets are not allowed, improved risk sharing that results from the destruction of output does not suffice to induce a Pareto superior allocation.

    Date
    Tuesday, 29 December 2015
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    11 - Short-Term Momentum and Long-Term Reversal of Returns under Limited Enforceability and Belief Heterogeneity

    Pablo Beker & Emilio ESPINO

    We evaluate the ability of the Lucas [25] tree and the Alvarez-Jermann [3] models, both with homogeneous as well as heterogeneous beliefs, to generate a time series of excess returns that displays both short-term momentum and long-term reversal, i.e., positive autocorrelation in the short-run and negative autocorrelation in the long-run. Our analysis is based on a methodological contribution that consists in (i) a recursive characterisation of the set of constrained Pareto optimal allocations in economies with limited enforceability and belief heterogeneity and (ii) an alternative decentralisation of these allocations as competitive equilibria with endogenous borrowing constraints. We calibrate the model to U.S. data as in Alvarez and Jermann [4]. We find that only the Alvarez-Jermann model with heterogeneous beliefs delivers autocorrelations that not only have the correct sign but are also of magnitude similar to the US data.

    Date
    Friday, 18 December 2015

    10 - Crowd Learning without Herding : A Mechanism Design Approach

    Jacob Glazer, Ilan Kremer & Motty Perry

    Crowdfunding, Internet websites, and health care are only a few examples of markets in which agents make decisions not only on the basis of their own investigations and knowledge, but also on the basis of information from a "central planner" about other agents’ actions. While such reciprocal learning can be welfare-improving, it may reduce agents’ incentives to conduct their own investigations, and may lead to harmful cascades. We study the planner’s optimal policy regarding when to provide information and how much information to provide. We show that the optimum policy involves a delicate balance of hiding and revealing information.

    Date
    Thursday, 17 December 2015
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    09 - Quantitative Easing in an Open Economy:Prices, Exchange Rates and Risk Premia

    M.Udara Peiris & Herakles Polemarchakis

    Explicit targets for the composition of assets traded by governments are necessary for fiscal-monetary policy to determine the stochastic paths of inflation or exchange rates; this is the case even if fiscal policy is non-Ricardian.Targets obtain with the traditional conduct of monetary policy and Credit Easing, but not with inconventional policy and Quantitative Easing. The composition of the portfolios traded by monetary-fiscal authorities determines premia in asset and currency markets

    Date
    Tuesday, 01 December 2015
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    08 - How To Count Citations If You Must

    Motty Perry & Philip J. Reny

    Citation indices are regularly used to inform critical decisions about promotion, tenure, and the allocation of billions of research dollars. Nevertheless, most indices (e.g., the h-index) are motivated by intuition and rules of thumb, resulting in undesirable conclusions. In contrast, five natural properties lead us to a unique new index, the Euclidean index, that avoids several shortcomings of the h-index and its successors. The Euclidean index is simply the Euclidean length of an individual’s citation list. Two empirical tests suggest that the Euclidean index outperforms the h-index in practice.

    Date
    Friday, 27 November 2015
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    07 - Why Sex? and Why Only in Pairs?

    Motty Perry, Philip J. Reny & Arthur J. Robson

    Understanding the purpose of sex remains one of the most important unresolved problems in evolutionary biology. The difficulty is not that there are too few theories of sex, the difficulty is that there are too many and none stand out. To distinguish between theories we suggest the following question: Why are there no triparental species in which an offspring is composed of the genetic material of three individuals? A successful theory should confer an advantage to biparental sex over asexual reproduction without conferring an even greater advantage to triparental sex. We pose our question in the context of two leading theories of sex, the (deterministic) mutational hypothesis that sex reduces the rate at which harmful mutations accumulate, and the red queen hypothesis that sex reduces the impact of parasitic attack by increasing genotypic variability. We show that the mutational hypothesis fails to provide an answer to the question because it implies that triparental sex dominates biparental sex, so the latter should never be observed. In contrast, we show that the red queen hypothesis is able to explain biparental sex without conferring an even greater advantage to triparental sex.

    Date
    Thursday, 26 November 2015

    06 - Evidence Games: Truth and Commitment

    Sergiu Hart, Ilan Kremer & Motty Perry

    An evidence game is a strategic disclosure game in which an informed agent who has some pieces of verifiable evidence decides which ones to disclose to an uninformed principal who chooses a reward. The agent, regardless of his information, prefers the reward to be as high as possible. We compare the setup where the principal chooses the reward after the evidence is disclosed to the mechanism-design setup where he can commit in advance to a reward policy. The main result is that under natural conditions on the truth structure of the evidence, the two setups yield the same equilibrium outcome.

    Date
    Wednesday, 25 November 2015
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    05 - Rational Expectations and Farsighted Stability

    Bhaskar Dutta & Rajiv Vohra

    In the study of farsighted coalitional behavior, a central role is played by the von Neumann-Morgenstern (1944) stable set and its modification that incorporates farsightedness. Such a modification was first proposed by Harsanyi (1974) and has recently been re-formulated by Ray and Vohra (2015). The farsighted stable set is based on a notion of indirect dominance in which an outcome can be dominated by a chain of coalitional ‘moves’ in which each coalition that is involved in the sequence eventually stands to gain. However, it does not require that each coalition make a maximal move, i.e., one that is not Pareto dominated (for the members of the coalition in question) by another. Nor does it restrict coalitions to hold common expectations regarding the continuation path from every state. Consequently, when there are multiple continuation paths the farsighted stable set can yield unreasonable predictions. We resolve this difficulty by requiring all coalitions to have common rational expectations about the transition from one outcome to another. This leads to two related concepts: the rational expectations farsighted stable set (REFS) and the strong rational expectations farsighted stable set (SREFS). We apply these concepts to simple games and to pillage games to illustrate the consequences of imposing rational expectations for farsighted stability

    Date
    Tuesday, 24 November 2015
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    04 - Perils of Quantitative Easing

    Michael McMahon, Udara Peiris & Herakles Polemarchakis

    Quantitative easing compromises the control of the central bank over the stochastic path of inflation.

    Date
    Tuesday, 03 November 2015
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    03-Voting in Legislative Elections Under Plurality Rule

    Niall Hughes

    Models of single district plurality elections show that with three parties anything can happen - extreme policies can win regardless of voter preferences. I show that when single district elections are used to fill a legislature we get back to a world where the median voter matters. An extreme policy will generally only come about if it is preferred to a more moderate policy by the median voter in a majority of districts. The mere existence of a centrist party can lead to moderate outcomes even if the party itself wins few seats. Furthermore, I show that while standard single district elections always have misaligned voting i.e. some voters do not vote for their preferred choice, equilibria of the legislative election exist with no misaligned voting in any district. Finally, I show that when parties are impatient, a fixed rule on how legislative bargaining occurs will lead to more coalition governments, while uncertainty will favour single party governments.

    Date
    Friday, 05 June 2015
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    02 - How Transparency Kills Information Aggregation

    Sebastian Fehrler & Niall Hughes

    We investigate the potential of transparency to influence committee decision making. We present a model in which career concerned committee members receive private information of different type-dependent accuracy, deliberate and vote. We study three levels of transparency under which career concerns are predicted to affect behavior differently, and test the model’s key predictions in a laboratory experiment. The model’s predictions are largely borne out - transparency negatively affects information aggregation at the deliberation and voting stages, leading to sharply different committee error rates than under secrecy. This occurs despite subjects revealing more information under transparency than theory predicts.

    Date
    Monday, 01 June 2015
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    01-The Identification of Beliefs from Asset Demand

    Felix Kubler & Herakles Polemarchakis

    The demand for assets as prices and initial wealth vary identifies beliefs and attitudes towards risk. We derive conditions that guarantee identification with no knowledge either of the cardinal utility index or of the distribution of future endowments or payoffs of assets; the argument applies even if the asset market is incomplete and demand is observed only locally.

    Date
    Sunday, 31 May 2015
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