Related papers: Land and Infinite Debt Rollover
An important class of economic models involve agents whose wealth changes due to transactions with other agents. Several authors have pointed out an analogy with kinetic theory, which describes molecules whose momentum and energy changes…
Envy-freeness and Pareto Efficiency are two major goals in welfare economics. The existence of an allocation that satisfies both conditions has been studied for a long time. Whether items are indivisible or divisible, it is impossible to…
Multiplicative Kantian equilibrium explains cooperative behavior in social dilemmas without abandoning methodological individualism. However, its outcomes depend critically on the parametrization of the strategy space - the property of…
We introduce an auto-regressive model which captures the growing nature of realistic markets. In our model agents do not trade with other agents, they interact indirectly only through a market. Change of their wealth depends, linearly on…
We investigate the accumulated wealth distribution by adopting evolutionary games taking place on scale-free networks. The system self-organizes to a critical Pareto distribution (1897) of wealth $P(m)\sim m^{-(v+1)}$ with $1.6 < v <2.0$…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
Employing data on the assessed value of land in 1983 -- 2005 Japan, we investigate the dynamical behavior in the high scale region of non-equilibrium systems. From the detailed quasi-balance and Gibrat's law, we derive a relation between…
This paper provides a general characterization of subgame perfect equilibria for strategic timing problems, where two firms have the (real) option to make an irreversible investment. Profit streams are uncertain and depend on the market…
I develop a tractable adverse-selection model comparing secured bank loans and bonds when both pledge collateral but differ in effective liquidation efficiency. A small wedge in recovery rates generates coexistence, a sharp bank-bond…
This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…
We prove existence and uniqueness of stochastic equilibria in a class of incomplete continuous-time financial environments where the market participants are exponential utility maximizers with heterogeneous risk-aversion coefficients and…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
This study contributes to the discussion about how higher public debt may not be costly because of the negative interest rate-growth differentials by simulating OLG models introduced by Blanchard (2019) under uncertainty, showing debt and…
Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the…
A debt swap is an elementary edge swap in a directed, weighted graph, where two edges with the same weight swap their targets. Debt swaps are a natural and appealing operation in financial networks, in which nodes are banks and edges…
We introduce a highly stylized, yet non trivial model of the economy, with a public and private sector coupled through a wealth tax and a redistribution policy. The model can be fully solved analytically, and allows one to address the…
A linear control system with quadratic cost functional over infinite time horizon is considered without assuming controllability/stabilizability condition and the global integrability condition for the nonhomogeneous term of the state…
We prove the global existence of an incomplete, continuous-time finite-agent Radner equilibrium in which exponential agents optimize their expected utility over both running consumption and terminal wealth. The market consists of a traded…
This paper studies a general class of social choice problems in which agents' payoff functions (or types) are privately observable random variables, and monetary transfers are not available. We consider cardinal social choice functions…
We prove the existence of a Radner equilibrium in a model with population growth and analyze the effects on asset prices. A finite population of agents grows indefinitely at a Poisson rate, while receiving unspanned income and choosing…