We present a learning-based selection argument for Linear Bayesian Nash equilibrium in a Walrasian auction. Endowments vary stochastically; traders model residual supply as linear, estimate its slope from past trade data, and periodically update these estimates. With quadratic preferences, this learning process converges to the unique LBN. In an example with non-quadratic preferences, it converges to a steady state close to a particular equilibrium of the corresponding deterministic setting; strategies played are not an equilibrium, but utility sacrificed is negligible. Anonymity and statistical learning therefore support use of LBN under quadratic utility, and motivate a related concept under non-quadratic utility.
Opublikowane | Published
Slope-takers in anonymous markets | AEJ: Microeconomics Przeczytaj streszczenie | Read abstract
An ordinal theorem of the maximum | Economic Theory Przeczytaj streszczenie | Read abstract
This paper extends the notion of equivalent variation, Hicks (1939) to an abstract decision problem. It also provides a modern, ordinal variant of the maximum theorem, Berge (1963) that formulates the assumptions in terms of underlying preferences and demonstrates the continuity of the classic preference-based welfare indices (i.e., the equivalent and compensating variations) as well as the upper hemicontinuity of the choice correspondence. We then apply the theorem to the relevant economic problems.
Co-worker altruism and unemployment | Games and Economic Behavior Przeczytaj streszczenie | Read abstract
It is well-known that social relationships and altruism among workers foster cooperation in the workplace and, therefore, may have beneficial effects for firms. Yet it is unclear how and to what extent co-worker altruism impacts labor market outcomes. In this paper, we find that, although co-worker altruism may be seamless in good times, it may impact the functioning of labor markets during bad times. Specifically, co-worker altruism may potentially lead to wage rigidity and involuntary unemployment in economic downturns. These results seem to be consistent with recent empirical findings.
Affective empathy in non-cooperative games | Games and Economic Behavior Przeczytaj streszczenie | Read abstract
According to psychology, affective empathy is one of the key processes governing human interactions. It refers to the automatic transmission and diffusion of emotions in response to others' emotions, which gives rise to emotional contagion. Contrary to other forms of empathy, affective empathy has received little attention in economics. In this paper, we augment the standard game-theoretic framework by allowing players to affectively empathize. Players' utility functions depend not only on the strategy prole being played, but also on the realized utilities of other players. Thus, players' realized utilities are interdependent, capturing emotional contagion. We offer a solution concept for these empathetic games and show that the set of equilibria is non-empty and, generically, finite. Motivated by psychological evidence, we analyze sympathetic and antipathetic games. In the former, players' utilities increase in others' realized utilities, capturing unconditional friendship; whereas in the latter the opposite holds, resembling hostility.
Normative inference in efficient markets | Economic Theory Przeczytaj streszczenie | Read abstract
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.
W toku | Work in progress
Welfare measurements with heterogeneous agents Przeczytaj streszczenie | Read abstract
The canonical infinite horizon framework with heterogeneous consumers, used in macro and financial literature, lacks a preference-based welfare index that produces consistent normative predictions for different policies. In particular, the classic preference-based indices, such as equivalent or compensating variations, do not aggregate and they are not additive on the set of policies. This paper offers a positive result. We show that for arbitrary heterogeneous von Neumann Morgenstern preferences with common discount factor, an equivalent (compensating) variation is nearly additive and admits a representative agent representation, as long as consumers are patient. Therefore, this index generates consistent quantitative comparisons of welfare effects in a wide variety of problems studied in the macro and finance literature. These problems include, among others, predictions regarding welfare impacts of fiscal or monetary policies, costs of real business cycles, or welfare costs of policies implemented in financial markets.