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Incomplete preferences and equilibrium in contingent markets
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Chambers, Robert G. and Melkonyan, Tigran A. (2020) Incomplete preferences and equilibrium in contingent markets. Economica, 87 (345). pp. 108-131. doi:10.1111/ecca.12296 ISSN 0013-0427.
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Official URL: https://doi.org/10.1111/ecca.12296
Abstract
This paper shows that betting or speculative trading between agents with incomplete preferences is likely to occur if agents have access to convex choice sets. This contrasts sharply with endowment economy models where preference incompleteness often hinders betting, speculative trading or mutually beneficial insurance arrangements. Our results imply that decision‐makers with identical tastes and identical feasible sets will potentially gain from speculative trade for generic status quo allocations. We also develop a framework for endogenizing the status quo allocations of decision‐makers that are treated exogenously in the existing literature. Finally, we provide a tractable differential representation of status quo allocations, equilibria and conditions where speculative trade may or may not emerge.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HG Finance | ||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
Library of Congress Subject Headings (LCSH): | Futures, Options (Finance) | ||||||||
Journal or Publication Title: | Economica | ||||||||
Publisher: | Blackwell Publishing | ||||||||
ISSN: | 0013-0427 | ||||||||
Official Date: | January 2020 | ||||||||
Dates: |
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Volume: | 87 | ||||||||
Number: | 345 | ||||||||
Page Range: | pp. 108-131 | ||||||||
DOI: | 10.1111/ecca.12296 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Reuse Statement (publisher, data, author rights): | "This is the peer reviewed version of the following article: Chambers, R. and Melkonyan, T. (2018), Incomplete Preferences and Equilibrium in Contingent Markets. Economica, which has been published in final form at https://doi.org/10.1111/ecca.12296. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions." | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 1 October 2018 | ||||||||
Date of first compliant Open Access: | 5 November 2020 | ||||||||
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