{"title":"Preferences on discounting under time risk","authors":"Marzia De Donno , Mario Menegatti","doi":"10.1016/j.jmateco.2024.103020","DOIUrl":"10.1016/j.jmateco.2024.103020","url":null,"abstract":"<div><p>This paper examines the linkages between different aspects of a decision maker’s attitude towards risk in the presence of time risk. Our results suggest that certain combinations of aspects of preferences towards risk are incoherent, supporting the idea that preferences exhibit risk-seeking, prudent, intemperate and antimixed risk-averse discounting, at least starting from a certain time horizon. Consequently, we observe that, unlike the case of risky outcome, in the presence of risky time, a decision maker usually prefers “combining good with good” rather than “combining good with bad”. We extend our analysis considering the implications of our findings on the decision maker’s attitude towards changes in risk of different degrees and uncertainty in the variance. Lastly, applications to saving for delayed expenditures and to investments under delayed risks are provided.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103020"},"PeriodicalIF":1.0,"publicationDate":"2024-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141586104","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Recursive two-stage evaluation model for dynamic decision making under ambiguity","authors":"Ying He","doi":"10.1016/j.jmateco.2024.103022","DOIUrl":"10.1016/j.jmateco.2024.103022","url":null,"abstract":"<div><p>In this paper, the two-stage-evaluation (TSE) model for decision making under ambiguity (He 2021) is extended to intertemporal setting in an axiomatic approach. The first set of axioms employed are commonly adopted for dynamic non-expected utility models in the literature. Besides these regular axioms, I also assume dynamic consistency and conditions which deliver a static TSE for consumption plans only pay non-zero consequences for one period. It is shown that these axioms hold if and only if these exists a recursively defined evaluation utility model representing decision maker (DM)’s preferences over consumption plans conditional on arriving at any node in an event tree. Such a recursive form implies that one can apply dynamic programming technique (rolling back the decision tree) to solve a dynamic decision making problem under TSE model. It can be shown that the solution for the recursively defined dynamic TSE model exists uniquely. Due to the “small domain” setup, the agent is short-sighted in the sense that they only process subjective probabilities over events defined on one period uncertainty over next period states, which differs from “far-sighted” assumption in most extant models that assume subjective probabilities exist over events defined on multiple periods. It is shown that under some extra conditions, our DM applies Bayes’ rule “updating’ her subjective beliefs.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103022"},"PeriodicalIF":1.0,"publicationDate":"2024-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S030440682400082X/pdfft?md5=0b10df5a79e45447f66db3677258e03e&pid=1-s2.0-S030440682400082X-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141586093","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Intergenerational equity and infinite-population ethics: A survey","authors":"Marcus Pivato , Marc Fleurbaey","doi":"10.1016/j.jmateco.2024.103021","DOIUrl":"10.1016/j.jmateco.2024.103021","url":null,"abstract":"<div><p>This article surveys the recent literature on infinite-horizon intergenerational social welfare and infinite-population ethics, reviewing the negative and positive results about the existence or constructibility of social preference relations and social welfare functions for infinite populations. Impossibility results primarily refer to the tension between Pareto and Anonymity (or inequality aversion). Positive results include characterizations of core social preference relations with which any relation satisfying desirable properties must be compatible, as well as overtaking criteria, asymptotic criteria, averaging criteria, hyperreal criteria, and criteria that focus on the worst-off.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103021"},"PeriodicalIF":1.0,"publicationDate":"2024-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141586103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Recent advances on testability in economic equilibrium models","authors":"Andrés Carvajal","doi":"10.1016/j.jmateco.2024.103019","DOIUrl":"10.1016/j.jmateco.2024.103019","url":null,"abstract":"<div><p>The revealed preference program started by Paul Samuelson brought a Popperian view of what constituted true scientific discovery to economic theory.<span><span><sup>1</sup></span></span> In his <em>Foundations</em>, Samuelson states that “meaningful theorems” are hypotheses “about empirical data which could conceivably be refuted”.<span><span><sup>2</sup></span></span> He worried that by appealing to unobservable fundamentals such as preferences, the body of economic theory built upon the premise of rational individual choice lacked a scientific foundation.</p><p>While the program quickly succeeded in providing an empirical counterpart for the individual choice problem, its application to social outcomes, namely market interactions and games, proved more difficult, and only in the 1990s did the profession start to develop the testable implications of equilibrium concepts in these contexts. Carvajal et al. (2004) covered the early literature that followed the seminal contributions of Brown and Matzkin (1996) and Sprumont (2000). This survey is an update on the state of that literature covering the results of the last two decades. As the reader will see, the <em>Journal of Mathematical Economics</em> has played a key role in developing these ideas.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"114 ","pages":"Article 103019"},"PeriodicalIF":1.0,"publicationDate":"2024-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141639413","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"A model of growth with living capital","authors":"Stefano Bosi , Carmen Camacho , Cuong Le Van","doi":"10.1016/j.jmateco.2024.103018","DOIUrl":"10.1016/j.jmateco.2024.103018","url":null,"abstract":"<div><p>Acknowledging the economic role of knowledge, education, training and health, can preserve and make them thrive without assuming that preferences depend on any of them. In this paper we will define living capital as the aggregate of all these factors, and then, total capital as the sum of physical and living capital.</p><p>In a planned economy, we find that the optimal sequence of total capital is always monotonic. Depending on the productivity of total capital, three different regimes hold: bounded growth; asymptotically balanced unbounded growth or unbalanced unbounded growth.</p><p>At the early stages of development the economy optimally devotes all its investment effort to increase the stock of physical capital and only physical capital. As the economy develops, it will start involving living capital in production. In the first regime, total capital converges to a steady state with a positive stock of total capital, which is larger than the one without living capital. In the second regime, growth becomes unbounded, and consumption grows at a constant rate. Total capital grows at the same rate but only asymptotically. In the third case, living capital is used increasingly from the beginning. Once the economy is sufficiently rich, physical capital starts growing faster than living capital.</p><p>To close, we consider a market economy with externalities from the living. In this scenario, if the government levies taxes to finance the accumulation of living capital and implements exactly the optimal sequence of living capital as in the planner’s program, then the equilibrium market prices exactly decentralize the planner’s solution.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103018"},"PeriodicalIF":1.0,"publicationDate":"2024-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141522055","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Identification in general equilibrium","authors":"F. Kübler , H. Polemarchakis","doi":"10.1016/j.jmateco.2024.103017","DOIUrl":"https://doi.org/10.1016/j.jmateco.2024.103017","url":null,"abstract":"<div><p>This survey covers the developments in the theory of the recoverability of unobserved fundamentals from observable variables in general equilibrium models. Concretely, suppose one observes equilibrium prices that vary with the profiles of individual endowments. What inferences can be made about individuals’ preferences? What are the local restrictions on the map, from profiles of endowments to prices? Suppose one only has finitely many observations. What inferences about individuals’ preferences can be made as the number of observations becomes large?</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103017"},"PeriodicalIF":1.0,"publicationDate":"2024-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0304406824000776/pdfft?md5=d3d1841ea875dbb7aef5319594ea526a&pid=1-s2.0-S0304406824000776-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141487096","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Idiosyncratic risk and the equity premium","authors":"Andrés Carvajal , Hang Zhou","doi":"10.1016/j.jmateco.2024.103014","DOIUrl":"https://doi.org/10.1016/j.jmateco.2024.103014","url":null,"abstract":"<div><p>This paper aims to further our understanding of the effect of idiosyncratic risk on the equity premium. We consider different classes of preferences and different co-variations between the idiosyncratic shocks’ variance and the economy’s aggregate income. We offer a complete characterization of the effect for short-lived assets relying on the cross-moments of different utility function derivatives and the economy’s aggregate income. We also study the effects of higher-order moments of the distribution of idiosyncratic risk.</p><p>Our comparative statics results present a series of corrections to the theoretical equity premium using a parameterization of the moments of the distribution of idiosyncratic risk. Our approach can be extended and applied in other contexts, but we recognize that no correction corresponds exactly to the equity premium except under extra assumptions. As a test of the robustness of our corrections, we compare them to the exact premium in a simplified setting where the latter can be explicitly computed. The results suggest that the approximation errors implicit in our corrections are at least of second order.</p><p>A complete characterization is elusive for long-lived assets, but we present sufficient conditions for reversing the effect on short-lived assets.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103014"},"PeriodicalIF":1.0,"publicationDate":"2024-06-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141434415","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Paweł Dziewulski , Joshua Lanier , John K.-H. Quah
{"title":"Revealed preference and revealed preference cycles: A survey","authors":"Paweł Dziewulski , Joshua Lanier , John K.-H. Quah","doi":"10.1016/j.jmateco.2024.103016","DOIUrl":"https://doi.org/10.1016/j.jmateco.2024.103016","url":null,"abstract":"<div><p>Afriat’s Theorem (1967) states that a dataset can be thought of as being generated by a consumer maximizing a continuous and increasing utility function if and only if it is free of revealed preference cycles containing a strict relation. The latter property is often known by its acronym, GARP (for <em>generalized axiom of revealed preference</em>). This paper surveys extensions and applications of Afriat’s seminal result. We focus on those results where the consistency of a dataset with the maximization of a utility function satisfying some property can be characterized by a suitably modified version of GARP.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103016"},"PeriodicalIF":1.0,"publicationDate":"2024-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0304406824000764/pdfft?md5=a8c2cf025663d151cfa467206cc87169&pid=1-s2.0-S0304406824000764-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141434416","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"(Non-)obvious manipulability of rank-minimizing mechanisms","authors":"Peter Troyan","doi":"10.1016/j.jmateco.2024.103015","DOIUrl":"https://doi.org/10.1016/j.jmateco.2024.103015","url":null,"abstract":"<div><p>In assignment problems, the rank distribution of assigned objects is often used to evaluate match quality. Rank-minimizing (RM) mechanisms directly optimize for average rank. While appealing, a drawback is RM mechanisms are not strategyproof. This paper investigates whether RM satisfies the weaker incentive notion of non-obvious manipulability (NOM, Troyan and Morrill, 2020). I show any RM mechanism with full support — placing positive probability on all rank-minimizing allocations — is NOM. In particular, uniform randomization satisfies this condition. Without full support, whether an RM mechanism is NOM or not depends on the details of the selection rule.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103015"},"PeriodicalIF":1.3,"publicationDate":"2024-06-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141324222","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"(Large) finite to continuum: An approximation result for electoral competition models","authors":"Mihir Bhattacharya , Saptarshi Mukherjee , Ruhi Sonal , Raghul S. Venkatesh","doi":"10.1016/j.jmateco.2024.103013","DOIUrl":"https://doi.org/10.1016/j.jmateco.2024.103013","url":null,"abstract":"<div><p>We consider a model of electoral competition with two contestants where voters have single-plateaued preferences. We characterize the Nash equilibria of the electoral game for two settings: (i) finite, and (ii) continuum of voters over finitely many voter preferences. We say that the continuum model approximates the finite voters model if the Nash equilibria set in the two models is the same when the population tends to infinity. We show that approximation holds if and only if the corresponding continuum model satisfies proportion conservation at the centre (PCC) and positive mass at limit-centre (PML). PCC states that the aggregate mass of voters at the centre in the continuum model be equal to its finite (proportional) counterpart as the population tends to infinity. PML requires that the limit-centre be in the support of the limit distribution in the continuum model. Our paper provides a framework for studying approximation of equilibria in electoral competition models.</p></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"113 ","pages":"Article 103013"},"PeriodicalIF":1.3,"publicationDate":"2024-06-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141324220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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