scholarly journals Sustainable debt

2021 ◽  
Vol 16 (4) ◽  
pp. 1513-1555
Author(s):  
G. Bloise ◽  
H. Polemarchakis ◽  
Y. Vailakis
Keyword(s):  
Risk Sharing ◽  
Competitive Equilibrium ◽  
Asset Market ◽  
Gains From Trade ◽  
Debt Contracts ◽  
Private Debt ◽  
Inside Money ◽  
Legal Sanctions ◽  
Competitive Equilibria ◽  
Incomplete Asset Market

We show that debt is sustainable at a competitive equilibrium based solely on the reputation for repayment; that is, even without collateral or legal sanctions available to creditors. In an incomplete asset market, when the rate of interest falls recurrently below the rate of growth of the economy, self‐insurance is more costly than borrowing, and repayments on loans are enforced by the implicit threat of loss of the risk‐sharing advantages of debt contracts. Private debt credibly circulates as a form of inside money, and it is not valued as a speculative bubble. Competitive equilibria with self‐enforcing debt exist under a suitable hypothesis of gains from trade.

scholarly journals RISK SHARING WITH EXPECTED AND DUAL UTILITIES

2017 ◽  
Vol 47 (2) ◽  
pp. 391-415 ◽  
Author(s):  
Tim J. Boonen
Keyword(s):  
Expected Utility ◽  
Risk Sharing ◽  
Competitive Equilibrium ◽  
Average Risk ◽  
Optimal Contract ◽  
Representative Agent ◽  
Equilibrium Prices ◽  
Competitive Equilibria ◽  
Utility Preferences ◽  
Optimal Risk Sharing

AbstractThis paper analyzes optimal risk sharing among agents that are endowed with either expected utility preferences or with dual utility preferences. We find that Pareto optimal risk redistributions and the competitive equilibria can be obtained via bargaining with a hypothetical representative agent of expected utility maximizers and a hypothetical representative agent of dual utility maximizers. The representative agent of expected utility maximizers resembles an average risk-averse agent, whereas representative agent of dual utility maximizers resembles an agent that has lowest aversion to mean-preserving spreads. This bargaining leads to an allocation of the aggregate risk to both groups of agents. The optimal contract for the expected utility maximizers is proportional to their allocated risk, and the optimal contract for the dual utility maximizing agents is given by “tranching” of their allocated risk. We show a method to derive equilibrium prices. We identify a condition under which prices are locally independent of the expected utility functions, and given in closed form. Moreover, we characterize uniqueness of the competitive equilibrium.

Experimental Stock Markets with Controlled Risk Preferences

1992 ◽  
Vol 7 (2) ◽  
pp. 117-134 ◽  
Author(s):  
John R. O'Brien
Keyword(s):  
Risk Sharing ◽  
Competitive Equilibrium ◽  
Risk Preferences ◽  
World Market ◽  
Equilibrium Price ◽  
Double Auction ◽  
Pareto Optimal ◽  
Market Institution ◽  
Certainty Equivalents ◽  
Optimal Risk Sharing

In this paper the empirical validity of the binary lottery preference inducing technique is tested in a real world market institution. In each market the potential gains to exchange arise from induced risk preferences, and the predicted competitive equilibrium is equivalent to the Pareto optimal risk sharing allocation. Price convergence to (and near) the competitive equilibrium price was rapid in each market, and most trades were individually rational with respect to induced certainty equivalents. This evidence implies that preferences can be induced in an oral double auction institution, using this technique.

scholarly journals Existence of General Competitive Equilibria: A Variational Approach

2016 ◽  
Vol 2016 ◽  
pp. 1-10
Author(s):  
G. Anello ◽  
F. Rania
Keyword(s):  
Variational Inequalities ◽  
Finite Number ◽  
Variational Methods ◽  
Variational Approach ◽  
Existence Result ◽  
Competitive Equilibrium ◽  
Utility Functions ◽  
Locally Lipschitz ◽  
Competitive Equilibria

We study the existence of general competitive equilibria in economies with agents and goods in a finite number. We show that there exists a Walras competitive equilibrium in all ownership private economies such that, for all consumers, initial endowments do not contain free goods and utility functions are locally Lipschitz quasiconcave. The proof of the existence of competitive equilibria is based on variational methods by applying a theoretical existence result for Generalized Quasi Variational Inequalities.

Stability and Generalized Competitive Equilibria in a Many-to-Many Gale-Shapley Market Model

2016 ◽  
Vol 63 (3) ◽  
pp. 237-254
Author(s):  
Zbigniew Świtalski
Keyword(s):  
Competitive Equilibrium ◽  
College Admissions ◽  
Supply And Demand ◽  
Type A ◽  
Market Model ◽  
Stable Matchings ◽  
Competitive Equilibria

We define, for some variant of a many-to-many market model of Gale-Shapley type, a concept of generalized competitive equilibrium and show that, under suitable conditions, stable matchings in such a model can be represented as competitive equilibria allocations (and vice versa). Our results are far-reaching generalizations of the “discrete supply and demand lemma” of Azevedo, Leshno (2011) for the college admissions market.Using the results of Alkan, Gale (2003), we also prove a theorem on existence of generalized equilibria in our model.

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