Incomplete Preferences and Equilibrium in Contingent Markets

Bibliographic Data

ID9725489
AuthorsRobert Chambers (0000-0001-8475-4501, University of Maryland), Robert G Chambers (0000-0002-6731-8932, University of Maryland, College Park), Tigran Melkonyan (0000-0001-5599-6405, University of Warwick)
Year2020
Volume87
Issue345
Pages108-131
Publication date2020-01-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/ecca.12296
OpenAlexW2900167697
LanguageEN
References cited38

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

Economics · Endowment · Market economy · Microeconomics · Preference · Representation (politics) · Status quo · Decision-Making and Behavioral Economics · Gambling Behavior and Treatments · Law, Economics, and Judicial Systems

Tools

Open DOISci-HubOpen Access