Related papers: Financial constraints, risk sharing, and optimal m…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…
We study Pareto efficiency in a pure-exchange economy where agents' preferences are represented by risk-averse monetary utilities. These coincide with law-invariant monetary utilities, and they can be shown to correspond to the class of…
This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how…
We study Pareto-optimal risk sharing in economies with heterogeneous attitudes toward risk, where agents' preferences are modeled by distortion risk measures. Building on comonotonic and counter-monotonic improvement results, we show that…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
We consider the problem of finding Pareto-optimal allocations of risk among finitely many agents. The associated individual risk measures are law invariant, but with respect to agent-dependent and potentially heterogeneous reference…
We characterize optimal monetary policy when policy endogenously moves risk premia through redistribution across agents who differ in their willingness to bear risk. The analytical core is Marginal Risk Capacity, the covariance of monetary…
According to the fundamental theorems of welfare economics, any competitive equilibrium is Pareto efficient. Unfortunately, competitive equilibrium prices only exist under strong assumptions such as perfectly divisible goods and convex…
In risk-sharing markets with aggregate uncertainty, characterizing Pareto-optimal allocations when agents might not be risk averse is a challenging task, and the literature has only provided limited explicit results thus far. In particular,…
We study optimal risk sharing among $n$ agents endowed with distortion risk measures. Our model includes market frictions that can either represent linear transaction costs or risk premia charged by a clearing house for the agents. Risk…
We study a problem of optimal allocation in a discrete-time multi-period pure-exchange economy, where agents have preferences over stochastic endowment processes that are represented by strongly time-consistent dynamic risk measures. We…
The aims of this study are twofold. First, we consider an optimal risk allocation problem with non-convex preferences. By establishing an infimal representation for distortion risk measures, we give some necessary and sufficient conditions…
We consider a nonlinear pricing environment with private information. We provide profit guarantees (and associated mechanisms) that the seller can achieve across all possible distributions of willingness to pay of the buyers. With a…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
In a dynamic economy, we characterize the fiscal policy of the government when it levies distortionary taxes and issues defaultable bonds to finance its stochastic expenditure. Default may occur in equilibrium as it prevents the government…
This paper examines optimal risk sharing for empirically realistic risk attitudes, providing results on Pareto optimality, competitive equilibria, utility frontiers, and the first and second theorems of welfare. Contrary to common…
In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and…
When users access shared resources in a selfish manner, the resulting societal cost and perceived users' cost is often higher than what would result from a centrally coordinated optimal allocation. While several contributions in mechanism…
This study investigates the optimal strategy for a firm operating in a dynamic Keynesian market setting. The firm's objective function is optimized using the percent deviations from the symmetric equilibrium of both its own price and the…