EQUILIBRIUM PRICES FOR MONETARY UTILITY FUNCTIONS

Damir Filipović () and Michael Kupper ()
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Damir Filipović: Vienna Institute of Finance (Supported by WWTF (Vienna Science and Technology Fund)), University of Vienna and Vienna University of Economics and Business Administration, Heiligenstädter Strasse 46–48, A-1190 Vienna, Austria
Michael Kupper: Vienna Institute of Finance (Supported by WWTF (Vienna Science and Technology Fund)), University of Vienna and Vienna University of Economics and Business Administration, Heiligenstädter Strasse 46–48, A-1190 Vienna, Austria

International Journal of Theoretical and Applied Finance (IJTAF), 2008, vol. 11, issue 03, 325-343

Abstract: This paper provides sufficient and necessary conditions for the existence of equilibrium pricing rules for monetary utility functions under convex consumption constraints. These utility functions are characterized by the assumption of a fully fungible numeraire asset ("cash"). Each agent's utility is nominally shifted by exactly the amount of cash added to his endowment. We find the individual maximum utility that each agent is eligible for in an equilibrium and provide a game theoretic point of view for the fair allocation of the aggregate utility.

Keywords: Existence of equilibrium prices; monetary utility functions; Pareto optimal allocation; convex consumption constraints (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (39)

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DOI: 10.1142/S0219024908004828

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