Aggregation in Incomplete Market with General Utility Functions

Chenghu Ma and Jiankang Zhang

No 2013-10-14, Working Papers from Wang Yanan Institute for Studies in Economics (WISE), Xiamen University

Abstract: This paper tackles the "aggregation problem" for stochastic economies with possibly incomplete market. An "aggregation theorem" is proved towards an analytic construction of the representative agent’s utility function. This is done within a general time-state setup with general utility functions and without restrictions on the initial resource allocations. Welfare implications, concerning the social welfare loss resulting from market incompleteness, are readily reflected from the constructed representative agent’s utility function

Keywords: Aggregation; constrained Pareto optimal; incomplete market (search for similar items in EconPapers)
JEL-codes: D52 G11 G12 (search for similar items in EconPapers)
Date: 2013-10-14
New Economics Papers: this item is included in nep-upt
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