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In this paper we analyse a dynamic model of investment under uncertainty in a duopoly, in which each firm has an option to switch from the present market to a new market. We construct a subgame perfect equilibrium in mixed strategies and…
Choo-Siow (2006) proposed a model for the marriage market which allows for random identically distributed noise in the preferences of each of the participants. The randomness is McFadden-type, which permits an explicit resolution of the…
In this study, we investigate asset price bubbles in a discrete-time, discrete-state market under model uncertainty and short sales prohibitions. Building on a new fundamental theorem of asset pricing and a superhedging duality in this…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
We present a strongly polynomial algorithm for computing an equilibrium in Arrow-Debreu exchange markets with linear utilities. Our algorithm is based on a variant of the weakly-polynomial Duan-Mehlhorn (DM) algorithm. We use the DM…
We study a single-buyer pricing problem with unreliable side information, motivated by the increasing use of AI-assisted decision-making and LLM-based predictions. The seller observes a private sample that may be either accurate (coinciding…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
This paper studies Markov perfect equilibria in a repeated duopoly model where sellers choose algorithms. An algorithm is a mapping from the competitor's price to own price. Once set, algorithms respond quickly. Customers arrive randomly…
For portfolio choice problems with proportional transaction costs, we discuss whether or not there exists a "shadow price", i.e., a least favorable frictionless market extension leading to the same optimal strategy and utility. By means of…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
Existing electricity market designs assume risk neutrality and lack risk-hedging instruments, which leads to suboptimal market outcomes and reduces the overall market efficiency. This paper enables risk-trading in the chance-constrained…
We model real-world data markets, where sellers post fixed prices and buyers are free to purchase from any set of sellers, as a simultaneous game. A key component here is the negative externality buyers induce on one another due to data…
Dark markets are commercial websites that use Bitcoin to sell or broker transactions involving drugs, weapons, and other illicit goods. Being illegal, they do not offer any user protection, and several police raids and scams have caused…
We consider trading against a hedge fund or large trader that must liquidate a large position in a risky asset if the market price of the asset crosses a certain threshold. Liquidation occurs in a disorderly manner and negatively impacts…
Shadow prices simplify the derivation of optimal trading strategies in markets with transaction costs by transferring optimization into a more tractable, frictionless market. This paper establishes that a na\"ive shadow price Ansatz for…
The Efficient Market Hypothesis has been a staple of economics research for decades. In particular, weak-form market efficiency -- the notion that past prices cannot predict future performance -- is strongly supported by econometric…
A new definition of continuous-time equilibrium controls is introduced. As opposed to the standard definition, which involves a derivative-type operation, the new definition parallels how a discrete-time equilibrium is defined, and allows…
AI stocks trade at extraordinary valuations. We develop an asset pricing model in which investors use AI stocks to hedge against an AI singularity that displaces their consumption. Because markets are incomplete -- investors cannot trade…
We consider a power utility maximization problem with additive habits in a framework of discrete-time markets and random endowments. For certain classes of incomplete markets, we establish estimates for the optimal consumption stream in…