Normative Inference in Efficient Markets

This paper develops a non-parametric method to infer social preferences over policies from prices of securities when agents have non-stationary heterogeneous preferences. We allow for arbitrary efficient risk-sharing mechanisms, formal and informal, and consider a large class of policies. We present a condition on the distribution of aggregate wealth that is necessary and sufficient for the revelation of social preferences over a universal set of policies. We also provide a weaker condition that is sufficient for revelation of social preferences for an arbitrary finite collection of policies.

Unpublished version

Published version

@Article{Weretka2018, author="Weretka, Marek", title="Normative inference in efficient markets", journal="Economic Theory", year="2018", volume="forthcoming", doi="10.1007/s00199-018-1144-6", }