
on Microeconomics 
By:  Johannes Horner (Cowles Foundation, Yale University); Satoru Takahashi (National University of Singapore); Nicolas Vieille (HEC Paris) 
Abstract:  This paper characterizes an equilibrium payoff subset for Markovian games with private information as discounting vanishes. Monitoring is imperfect, transitions may depend on actions, types be correlated and values interdependent. The focus is on equilibria in which players report truthfully. The characterization generalizes that for repeated games, reducing the analysis to static Bayesian games with transfers. With correlated types, results from mechanism design apply, yielding a folk theorem. With independent private values, the restriction to truthful equilibria is without loss, except for the punishment level; if players withhold their information during punishmentlike phases, a "folk" theorem obtains also. 
Keywords:  Bayesian games, Repeated games, Folk theorem 
JEL:  C72 C73 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:cwl:cwldpp:1933&r=mic 
By:  Kohei, Kawamura 
Abstract:  This paper studies information transmission between an uninformed decision maker (receiver) and an informed player (sender) who have asymmetric beliefs ("con fidence") on the sender s ability ("competence") to observe the state of nature. We fi nd that even when the material payoffs of are perfectly aligned, the sender s over and underconfi dence on his information give rise to information loss in communication, although they do not by themselves completely eliminate information transmission in equilibrium. However, an underconfi dent sender may prefer no communication to informative communication. We also show that when the sender is biased, overconfi dence can lead to more information transmission and welfare improvement. 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:470&r=mic 
By:  Sourav Bhattacharya; Maria Goltsman; Arijit Mukherjee 
Abstract:  We consider a persuasion game between a decisionmaker and a panel of biased experts. The decisionmaker prefers to take an action in [0, 1] that matches the underlying state but relies on the experts to learn the state. Each expert has his `ideal` action or `agenda` and may conceal unfavorable information. If the decision maker can select the panel members based on their agendas, what panel would she choose? While common intuition favors diverse panel (as experts would restrict each other`s ability to alter information), Bhattacharya and Mukherjee (2013) presents an example where a `homogeneous` panel (either all have agenda 0, or all have agenda 1) is more conducive to information revelation than a `diverse` panel (where one expert`s agenda is 0 the other`s is 1). We analyze the optimal diversity in expert panels and show that under mild conditions, a homogeneous panel is optimal when the experts observe the state independently of each other. But if the observability of the state is correlated across experts, diverse panel may be optimal. Hence, the diversity of agendas must be considered in conjunction with the diversity of information sources, and it is never optimal to seek diversity in both dimensions. 
Date:  2013–01 
URL:  http://d.repec.org/n?u=RePEc:pit:wpaper:516&r=mic 
By:  Kohei, Kawamura; Vasileios, Vlaseros 
Abstract:  This paper studies dichotomous majority voting in common interest committees where each member receives not only a private signal but also a public signal observed by all of them. The public signal represents, e.g. expert information presented to an entire committee and its quality is higher than that of each individual private signal. We identify two informative symmetric strategy equilibria, namely i) the mixed strategy equilibrium where each member randomizes between following the private and public signals should they disagree; and ii) the pure strategy equilibrium where they follow the public signal for certain. The former outperforms the latter. The presence of the public signal precludes the equilibrium where every member follows their own signal, which is an equilibrium in the absence of the public signal. The mixed strategy equilibrium in the presence of the public signal outperforms the sincere voting equilibrium without the public signal, but the latter may be more efficient than the pure strategy equilibrium in the presence of the public signal. We suggest that whether expert information improves committee decision making depends on equilibrium selection. 
Keywords:  information aggregation, strategic voting, expert information, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:446&r=mic 
By:  Manzini, Paola; Mariotti, Marco 
Abstract:  We model the choice behaviour of an agent who suffers from imperfect attention but is otherwise von Neumann Morgenstern rational. We define inattention axiomatically through preference over menus and endowed alternatives: an agent is inattentive if it is better to be endowed with an alternative a than to be allowed to pick a from a menu in which a is is the best alternative. This property and vNM rationality on the domain of menus and alternatives imply that the agent notices each alternative with a given menudependent probability (attention parameter) and maximises a menu independent utility function over the alternatives he notices. Preference for flexibility restricts the model to menu independent attention parameters as in Manzini and Mariotti [17]. Our theory explains anomalies (e.g. the attraction effect) that other prominent stochastic choice theories cannot accommodate. 
Keywords:  bounded rationality, stochastic choicens, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:523&r=mic 
By:  Georgios, Gerasimou 
Abstract:  This paper proposes a model of choice that does not assume completeness of the decision maker’s preferences. The model explains in a natural way, and within a unified framework of choice when preferenceincomparable options are present, four behavioural phenomena: the attraction effect, choice deferral, the strengthening of the attraction effect when deferral is permissible, and status quo bias. The key element in the proposed decision rule is that an individual chooses an alternative from a menu if it is worse than no other alternative in that menu and is also better than at least one. Utilitymaximising behaviour is included as a special case when preferences are complete. The relevance of the partial dominance idea underlying the proposed choice procedure is illustrated with an intuitive generalisation of weakly dominated strategies and their iterated deletion in games with vector payoffs. 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:460&r=mic 
By:  Diasakos, Theodoros M 
Abstract:  I develop a model of endogenous bounded rationality due to search costs, arising implicitly from the problems complexity. The decision maker is not required to know the entire structure of the problem when making choices but can think ahead, through costly search, to reveal more of it. However, the costs of search are not assumed exogenously; they are inferred from revealed preferences through her choices. Thus, bounded rationality and its extent emerge endogenously: as problems become simpler or as the benefits of deeper search become larger relative to its costs, the choices more closely resemble those of a rational agent. For a fixed decision problem, the costs of search will vary across agents. For a given decision maker, they will vary across problems. The model explains, therefore, why the disparity, between observed choices and those prescribed under rationality, varies across agents and problems. It also suggests, under reasonable assumptions, an identifying prediction: a relation between the benefits of deeper search and the depth of the search. As long as calibration of the search costs is possible, this can be tested on any agentproblem pair. My approach provides a common framework for depicting the underlying limitations that force departures from rationality in different and unrelated decisionmaking situations. Specifically, I show that it is consistent with violations of timing independence in temporal framing problems, dynamic inconsistency and diversification bias in sequential versus simultaneous choice problems, and with plausible but contrasting risk attitudes across small and largestakes gambles. 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:510&r=mic 
By:  Chatterji, S.; Ghosal, Sayantan 
Abstract:  We defi ne a solution concept, perfectly contracted equilibrium, for an intertemporal exchange economy where agents are simultaneously price takers in spot commodity markets while engaging in nonWalrasian contracting over future prices. In a setting with subjective uncertainty over future prices, we show that perfectly contracted equi librium outcomes are a subset of Pareto optimal allocations. It is a robust possibility for perfectly contracted equilibrium outcomes to di er from ArrowDebreu equilibrium outcomes. We show that both centralized banking and retrading with bilateral contracting can lead to perfectly contracted equilibria. 
Keywords:  equilibrium, future prices, uncertainty, contracts, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:505&r=mic 
By:  Xiao Yu Wang 
Abstract:  Mechanisms which implement stable matchings are often observed to work well in practice, even in environments where the stable outcome is not unique, information is complete, and the number of players is small. Why might individuals refrain from strategic manipulation, even when the complexity cost of manipulation is low? I study a twosided, onetoone matching problem with no side transfers, where utility is interdependent in the following intuitive sense: an individual's utility from a match depends not only on her preference ranking of her assigned partner, but also on that partner's ranking of her. I show that, in a world of complete information and linear interdependence, a unique stable matching emerges, and is attained by a modified GaleShapley deferred acceptance algorithm. As a result, a stable rule supports truthtelling as an equilibrium strategy. Hence, these results offer a new intuition for why stable matching mechanisms seem to work well in practice, despite their theoretic manipulability: individuals may value being liked. 
Keywords:  twosided matching, interdependent utility, stability 
JEL:  C78 D82 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:duk:dukeec:1322&r=mic 
By:  Herings P.J.J.; Meshalkin A.V.; Predtetchinski A. (GSBE) 
Abstract:  We study the division of a surplus under majoritarian bargaining in the threeperson case. In a stationary equilibrium as derived by Baron and Ferejohn 1989, the proposer offers one third times the discount factor of the surplus to a second player and allocates no payoff to the third player, a proposal which is accepted without delay. Laboratory experiments show various deviations from this equilibrium, where different offers are typically made and delay may occur before acceptance. We address the issue to what extent these findings are compatible with subgame perfect equilibrium and characterize the set of subgame perfect equilibrium payoffs for any value of the discount factor. We show that for any proposal in the interior of the space of possible agreements there exists a discount factor such that the proposal is made and accepted. We characterize the values of the discount factor for which equilibria with oneperiod delay exist. We show that any amount of equilibrium delay is possible and we construct subgame perfect equilibria such that arbitrary long delay occurs with probability one. 
Keywords:  Noncooperative Games; Bargaining Theory; Matching Theory; 
JEL:  C72 C78 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:dgr:umagsb:2013072&r=mic 
By:  Bertola, Giuseppe (EDHEC Business School); Koeniger, Winfried (University of St. Gallen) 
Abstract:  We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effortdetermined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional form restrictions ensure that individual objective functions are optimized by an effort and insurance combination that is unique and satisfies first and secondorder conditions. Modeling insurance incompleteness in terms of costly production of private insurance services, we characterize the constrained inefficiency arising in general equilibrium from competitive pricing of nonexclusive financial contracts. 
Keywords:  hidden action, principal agent, firstorder approach, constrained efficiency 
JEL:  E21 D81 D82 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:iza:izadps:dp7806&r=mic 
By:  Rupert Sausgruber (Department of Economics, Copenhagen University); Christoph Schotmüller (Department of Economics, Tilburg University) 
Abstract:  We study a monopoly insurance model with endogenous information acquisition. Through a continuous effort choice, consumers can determine the precision of a privately observed signal that is informative about their accident risk. The equilibrium effort is, depending on parameter values, either zero (implying symmetric information) or positive (implying privately informed consumers). Regardless of the nature of the equilibrium, all offered contracts, also at the top, involve underinsurance. The reason is that underinsurance at the top discourages information gathering. We identify a sorting effect that explains why the insurer wants to discourage information acquisition. Moreover, a public policy that decreases the information gathering costs can hurt both parties. Lower information gathering costs can harm consumers because the insurer adjusts the optimal contract menu in an unfavorable manner. 
Keywords:  asymmetric information, information acquisition, insurance, screening, adverse selection 
JEL:  D82 I13 
Date:  2013–11–26 
URL:  http://d.repec.org/n?u=RePEc:kud:kuiedp:1315&r=mic 
By:  Sanjit Dhami; Ali alNowaihi 
Abstract:  Standard equilibrium concepts in game theory find it difficult to explain the empirical evidence in a large number of static games such as prisoners’ dilemma, voting, public goods, oligopoly, etc. Under uncertainty about what others will do in oneshot games of complete and incomplete information, evidence suggests that people often use evidential reasoning (ER), i.e., they assign diagnostic significance to their own actions in forming beliefs about the actions of other like minded players. This is best viewed as a heuristic or bias relative to the standard approach. We provide a formal theoretical framework that incorporates ER into static games by proposing evidential games and the relevant solution concept evidential equilibrium (EE). We derive the relation between a Nash equilibrium and an EE. We also apply EE to several common games including the prisoners’ dilemma and oligopoly games. 
Keywords:  Evidential reasoning; causal reasoning; evidential games; social projec tion functions; ingroups and outgroups; evidential equilibria and consistent eviden tial equilibria; Nash equilibria; the prisoners.dilemma and oligopoly games; common knowledge and epistemic foundations. 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:lec:leecon:13/25&r=mic 
By:  Sourav Bhattacharya; Paulo Barelli 
Abstract:  We provide a simple condition that is both necessary and sufficient for aggregation of private information in large elections where all voters have the same preference. In some states of the world, all voters prefer A; and in other states, all voters prefer B. Each voter draws a private signal independently from a distribution conditional on the state. According to our condition, there should be a hyperplane in the simplex over signals that separates the conditional distributions in states where A is preferred from those in states where B is preferred. If this condition is satisfied, information is aggregated in an equilibrium sequence: even under incomplete information, the preferred outcome obtains almost surely in each state. If the hyperplane condition is violated, there exists no feasible strategy profile that aggregates information. Therefore, information aggregation holds only for special environments. 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:pit:wpaper:515&r=mic 
By:  Georgios, Gerasimou 
Abstract:  Sufficient conditions are provided for a possibly incomplete preference preorder on a topological space to be closed in the product space if and only if it has closed upper and lower contour sets. Notably, it is shown that the two properties are equivalent if the domain of the preorder is a Hausdorff (T2) topological space. The two concepts are therefore identical in the overwhelming majority of cases that are of interest to economists, even when completeness is not assumed. 
Keywords:  Incomplete preorders, continuity, hemicontinuity, equivalence, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:465&r=mic 
By:  Dennis, Richard; Kirsanova, Tatiana 
Abstract:  Discretionary policymakers cannot manage privatesector expectations and cannot coordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. To utilize the explanatory power of models with multiple equilibria it is first necessary to understand how an economy arrives to a particular equilibrium. In this paper we employ notions of learnability and selfenforceability to motivate and identify equilibria of particular interest. Central among these criteria are whether the equilibrium is learnable by private agents and jointly learnable by private agents and the policymaker. We use two New Keynesian policy models to identify the strategic interactions that give rise to multiple equilibria and to illustrate our methods for identifying equilibria of interest. Importantly, unless the Paretopreferred equilibrium is learnable by private agents, we find little reason to expect coordination on that equilibrium. 
Keywords:  Discretionary policymaking, multiple equilibria, coordination, equilibrium selection, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:449&r=mic 
By:  Paola, Manzini; Marco, Mariotti 
Abstract:  We model a boundedly rational agent who suffers from limited attention. The agent considers each feasible alternative with a given (unobservable) probability, the attention parameter, and then chooses the alternative that maximises a preference relation within the set of considered alternatives. We show that this random choice rule is the only one for which the impact of removing an alternative on the choice probability of any other alternative is asymmetric and menu independent. Both the preference relation and the attention parameters are identi fied uniquely by stochastic choice data. 
Keywords:  Discrete choice, Random utility, Logit model, Luce model, Consideration sets, bounded rationality, revealed preferences, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:463&r=mic 
By:  Alcantud, José Carlos R.; Bosi, Gianni; Zuanon, Magalì 
Abstract:  We introduce a new kind of representation of a not necessarily total preorder, called strong multiutility representation, according to which not only the preorder itself but also its strict part is fully represented by a family of multiobjective functions. The representability by means of semicontinuous or continuous multiobjective functions is discussed, as well as the relation between the existence of a strong multiutility representation and the existence of a RichterPeleg utility function. We further present conditions for the existence of a semicontinuous or continuous countable strong multiutility representation. 
Keywords:  Multiutility representation, RichterPeleg utility, Strong multiutility 
JEL:  C0 D01 
Date:  2013–12–01 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:52329&r=mic 
By:  Diasakos, Theodoros M; Koufopoulos, Kostas 
Abstract:  This paper revisits the problem of adverse selection in the insurance market of Rothschild and Stiglitz [28]. We propose a simple extension of the gametheoretic structure in Hellwig [14] under which Nashtype strategic interaction between the informed customers and the uninformed firms results always in a particular separating equilibrium. The equilibrium allocation is unique and Paretoefficient in the interim sense subject to incentivecompatibility and individual rationality. In fact, it is the unique neutral optimum in the sense of Myerson [22]. 
Keywords:  Insurance Market, Adverse Selection, Incentive Efficiency, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:509&r=mic 
By:  Herweg, Fabian; Müller, Daniel 
Abstract:  We extend Akerlof (1970)â€™s â€œMarket for Lemonsâ€ by assuming that some buyers are overconfident. Buyers in our model receive a noisy signal about the quality of the good that is on display for sale. Overconfident buyers do not update according to Bayesâ€™ rule but take the noisy signal at face value. We show that the presence of overconfident buyers can stabilize the market outcome by preventing total adverse selection. This stabilization, however, comes at a cost: rational buyers are crowded out of the market. 
Keywords:  Adverse Selection; Market for Lemons; Overconfidence 
JEL:  D82 L15 
Date:  2013–12–17 
URL:  http://d.repec.org/n?u=RePEc:trf:wpaper:452&r=mic 
By:  Cosaert, Sam 
Abstract:  When consumers do not only care for the intrinsic consumption component of commodities but also for the value of a commodity, it can be rational to purchase products as they become more expensive. Standard revealed preference conditions are however unable to take diamond effects into account. We develop a theoretical model and the associated revealed preference conditions to analyze commodities with different degrees of diamondness. On the basis of real consumer data from the Russian Longitudinal Monitoring Survey, we test the empirical performance of different models with and without diamond effects. It turns out that allowing for diamond effects improves the predictive success of the models. We also link the newly identified diamondness weights to the visibility of commodities. The results suggest that visible goods are more likely to induce diamond effects. 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:ner:leuven:urn:hdl:123456789/429594&r=mic 
By:  Stark, Oded; Jakubek, Marcin; Falniowski, Fryderyk 
Abstract:  Under a deadweight loss of tax and transfer, there is tension between the optimal policy choices of a Rawlsian social planner and a utilitarian social planner. However, when with a weight greater than a certain critical value the individuals' utility functions incorporate distaste for low relative income, a utilitarian will select exactly the same income distribution as a Rawlsian.  
Keywords:  Maximization of social welfare,Rawlsian social welfare function,Utilitarian social welfare function,Deadweight loss,Distaste for low relative income 
JEL:  D31 D60 H21 I38 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:zbw:tuewef:65&r=mic 
By:  Marco LiCalzi (Dept. of Management, Università Ca' Foscari Venezia); Nadia Maagli (UniversitŽ Paris1PantheonSorbonne) 
Abstract:  Two agents endowed with different individual conceptual spaces are engaged in a dialectic process to reach a common understanding. We model the process as a simple noncooperative game and demonstrate three results. When the initial disagreement is focused, the bargaining process has a zerosum structure. When the disagreement is widespread, the zerosum structure disappears and the unique equilibrium requires a retraction of consensus: two agents who individually agree to associate a region with the same concept end up rebranding it as a different concept. Finally, we document a conversers' dilemma: such equilibrium outcome is Paretodominated by a cooperative solution that avoids retraction. 
Keywords:  cognitive maps, language differences, semantic bargaining, organisational codes, mental models. 
JEL:  C78 D83 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:vnm:wpdman:66&r=mic 
By:  Alexei Parakhonyak (National Research University Higher School of Economics); Nick Vikander (Department of Economics, Copenhagen University) 
Abstract:  This paper examines the optimal sequencing of sales in the presence of network externalities. A firm sells a good to a group of consumers whose payoff from buying is increasing in total quantity sold. The firm selects the order to serve consumers so as to maximize expected sales. It can serve all consumers simultaneously, serve them all sequentially, or employ any intermediate scheme. We show that the optimal sales scheme is purely sequential, where each consumer observes all previous sales before choosing whether to buy himself. A sequential scheme maximizes the amount of information available to consumers, allowing success to breed success. Failure can also breed failure, but this is made less likely by consumers’ desire to influence one another’s behavior. We show that when consumers differ in the weight they place on the network externality, the firm would like to serve consumers with lower weights first. Our results suggests that a firm launching a new product should first target independentminded consumers who can serve as opinion leaders for those who follow. 
Keywords:  Product launch, Network externality, Sequencing of sales 
JEL:  M31 D42 D82 L12 
Date:  2013–11–01 
URL:  http://d.repec.org/n?u=RePEc:kud:kuiedp:1311&r=mic 
By:  Paulina RestrepoEchavarria (The Ohio State University); Antonella Tutino (Federal Reserve Bank of Dallas); Anton Cheremukhin (Federal Reserve Bank of Dallas) 
Abstract:  We develop a model of matching where participants have finite information processing capacity. The equilibrium of our model covers the middle ground between the equilibria of random matching and the directed search literatures and reproduces them as limiting cases. Our theory of targeted search generates a unique equilibrium which is generally inefficient. 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:red:sed013:664&r=mic 
By:  Clausen, Andrew 
Abstract:  In many moral hazard problems, the principal evaluates the agent's performance based on signals which the agent may suppress and replace with counterfeits. This form of fraud may affect the design of optimal contracts drastically, leading to complete market failure in extreme cases. I show that in optimal contracts, the principal deters all fraud, and does so by two complementary mechanisms. First, the principal punishes signals that are suspicious, i.e. appear counterfeit. Second, the principal is lenient on bad signals that the agent could suppress, but does not. 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:442&r=mic 
By:  Dickson, Alex 
Abstract:  Bilateral oligopoly is a simple model of exchange in which a finite set of sellers seek to exchange the goods they are endowed with for money with a finite set of buyers, and no pricetaking assumptions are imposed. If trade takes place via a strategic market game bilateral oligopoly can be thought of as two linked proportionalsharing contests: in one the sellers share the aggregate bid from the buyers in proportion to their supply and in the other the buyers share the aggregate supply in proportion to their bids. The analysis can be separated into two ‘partial games’. First, fix the aggregate bid at B; in the first partial game the sellers contest this fixed prize in proportion to their supply and the aggregate supply in the equilibrium of this game is X˜ (B). Next, fix the aggregate supply at X; in the second partial game the buyers contest this fixed prize in proportion to their bids and the aggregate bid in the equilibrium of this game is ˜B (X). The analysis of these two partial games takes into account competition within each side of the market. Equilibrium in bilateral oligopoly must take into account competition between sellers and buyers and requires, for example, ˜B (X˜ (B)) = B. When all traders have CobbDouglas preferences ˜ X(B) does not depend on B and ˜B (X) does not depend on X: whilst there is competition within each side of the market there is no strategic interdependence between the sides of the market. The CobbDouglas assumption provides a tractable framework in which to explore the features of fully strategic trade but it misses perhaps the most interesting feature of bilateral oligopoly, the implications of which are investigated. 
Keywords:  strategic market game, bilateral oligopoly, CobbDouglas preferences, aggregative games, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:edn:sirdps:493&r=mic 
By:  OKADA, Akira 
Abstract:  We consider a noncooperative twoperson sequential bargaining game with incomplete information. Player types are verifiable when a contract is implemented. We show that there is no delay in agreements and the inscrutability principle holds under the property of independence of irrelevant types (IIT), whereby the response of every type of player is independent of proposals to other player types. We prove the existence of a stationary sequential equilibrium satisfying IIT and a selfselection property for every discount factor for future payoffs. We also show that the equilibrium proposal of every player converges to the ex post Nash bargaining solution as the discount factor goes to one. 
Keywords:  bargaining, incomplete information, mechanism selection, ex post Nash bargaining solution, noncooperative games 
JEL:  C72 C78 D82 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:hit:econdp:201315&r=mic 
By:  Xu, Guo; WingKeung, Wong; Lixing, Zhu 
Abstract:  In this paper we �first develop a theory of almost stochastic dominance for riskseeking investors to the first three orders. Thereafter, we study the relationship between the preferences of almost stochastic dominance for riskseekers with that for risk averters. 
Keywords:  Almost Stochastic Dominance, expectedutility maximization, risk averters, risk seekers. 
JEL:  C00 D81 G11 
Date:  2013–11–27 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:51744&r=mic 
By:  Gaetano Bloise 
Abstract:  I provide a complete characterization of equilibrium with risk of default in sequential economies under uncertainty. Default induces permanent exclusion from financial markets and nottootight solvency constraints prevent debt repudiation at equilibrium. The method of analysis relies on a recursive planning program along with the theory of monotone concave opera tors. The reputational mechanism is fragile, as it sustains constrained efficient as well as constrained inefficient equilibria. Constrained inefficient equilibria involve a progressive deterioration of reputation, inducing a collapse of financial markets with positive probability. Importantly, the only ergodic recursive equilibria (involving trade) are constrained efficient. 
Keywords:  Limited commitment; solvency constraints; competitive equilib rium; constrained eciency; dynamic programming; monotone concave oper ator. 
JEL:  D50 D52 D61 E44 G13 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:rtr:wpaper:0187&r=mic 