Arrow-Debreu equilibria for rank-dependent utilities with heterogeneous probability weighting

Noisy Arrow - Debreu Equilibria ∗

I develop a noisy rational expectations equilibrium model with a continuum of states and a full set of options that render the market complete. I show a major difference in equilibrium behavior between models with constant absolute risk aversion (CARA) and non-CARA preferences. First, when informed traders have non-CARA preferences, all equilibria are fully revealing, independent of the amount ...

Implementing Arrow-debreu Equilibria by T Rading Innnitely-lived Securities

Rank-Dependent Probability Weighting in Sequential Decision Problems under Uncertainty

This paper is devoted to the computation of optimal strategies in automated sequential decision problems. We consider here problems where one seeks a strategy which is optimal for rank dependent utility (RDU). RDU generalizes von Neumann and Morgenstern’s expected utility (by probability weighting) to encompass rational decision behaviors that EU cannot accomodate. The induced algorithmic probl...

Linear Arrow-Debreu market equilibrium

We study the linear Arrow-Debreu’s model and derive a fix point method to find the market equilibrium. The convergence of this method is proved, while the speed is unknown. Besides that, properties about utility distribution and the partition of buyers are also studied. I. PROBLEM DEFINITION The problems of market equilibrium were initially studied in the domain of mathematical economics. We st...

Ranking via Arrow-Debreu Equilibrium

In this paper, we establish a connection between ranking theory and general equilibrium theory. First of all, we show that the ranking vector of PageRank or Invariant method is precisely the equilibrium of a special Cobb-Douglas market. This gives a natural economic interpretation for the PageRank or Invariant method. Furthermore, we propose a new ranking method, the CES ranking, which is minim...