Arrow-Debreu equilibria for rank-dependent utilities with heterogeneous probability weighting

doi:10.1111/mafi.12200

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	Arrow-Debreu equilibria for rank-dependent utilities with heterogeneous probability weighting
	Jin, Hanqing 1,2; Xia, Jianming3 ; Zhou, Xun Yu 4
	2019-07-01
发表期刊	MATHEMATICAL FINANCE
ISSN	0960-1627
卷号	29 期号:3 页码:898-927
摘要	We study Arrow-Debreu equilibria for a one-period-two-date pure exchange economy with rank-dependent utility agents having heterogeneous probability weighting and outcome utility functions. In particular, we allow the economy to have a mix of expected utility agents and rank-dependent utility ones, with nonconvex probability weighting functions. The standard approach for convex economy equilibria fails due to the incompatibility with second-order stochastic dominance. The representative agent approach devised in Xia and Zhou (2016) does not work either due to the heterogeneity of the weighting functions. We overcome these difficulties by considering the comonotone allocations, on which the rank-dependent utilities become concave. Accordingly, we introduce the notion of comonotone Pareto optima, and derive their characterizing conditions. With the aid of the auxiliary problem of price equilibria with transfers, we provide a sufficient condition in terms of the model primitives under which an Arrow-Debreu equilibrium exists, along with the explicit expression of the state-price density in equilibrium. This new, general sufficient condition distinguishes the paper from previous related studies with homogeneous and/or convex probability weightings.
关键词	Arrow-Debreu equilibrium comonotone Pareto optimum price equilibrium with transfers probability weighting rank-dependent utility state-price density G11
DOI	10.1111/mafi.12200
语种	英语
资助项目	NSFC (National Natural Science Foundation of China)[11231005] ; Columbia University ; Oxford-Man Institute of Quantitative Finance ; Oxford-Nie Financial Big Data Lab
WOS研究方向	Business & Economics ; Mathematics ; Mathematical Methods In Social Sciences
WOS类目	Business, Finance ; Economics ; Mathematics, Interdisciplinary Applications ; Social Sciences, Mathematical Methods
WOS记录号	WOS:000470926900008
出版者	WILEY
引用统计
文献类型	期刊论文
条目标识符	http://ir.amss.ac.cn/handle/2S8OKBNM/34988
专题	应用数学研究所
通讯作者	Zhou, Xun Yu
作者单位	1.Univ Oxford, Math Inst, Oxford, England 2.Univ Oxford, Oxford Nie Financial Big Data Lab, Oxford, England 3.Chinese Acad Sci, Acad Math & Syst Sci, RCSDS, NCMIS, Beijing, Peoples R China 4.Columbia Univ, Dept Ind Engn & Operat Res, New York, NY 10027 USA
推荐引用方式 GB/T 7714	Jin, Hanqing,Xia, Jianming,Zhou, Xun Yu. Arrow-Debreu equilibria for rank-dependent utilities with heterogeneous probability weighting[J]. MATHEMATICAL FINANCE,2019,29(3):898-927.
APA	Jin, Hanqing,Xia, Jianming,&Zhou, Xun Yu.(2019).Arrow-Debreu equilibria for rank-dependent utilities with heterogeneous probability weighting.MATHEMATICAL FINANCE,29(3),898-927.
MLA	Jin, Hanqing,et al."Arrow-Debreu equilibria for rank-dependent utilities with heterogeneous probability weighting".MATHEMATICAL FINANCE 29.3(2019):898-927.