Comonotonicity, Efficient Risk-sharing and Equilibria in markets with short-selling for concave law-invariant utilities

Rose-Anne Dana ()
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Rose-Anne Dana: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: In finite markets with short-selling, conditions on agents' utilities insuring the existence of efficient allocations and equilibria are by now well understood. In infinite markets, a standard assumption is to assume that the individually rational utility set is compact. Its drawback is that one does not know whether this assumption holds except for very few examples as strictly risk averse expected utility maximizers with same priors. The contribution of the paper is to show that existence holds for the class of strictly concave second order stochastic dominance preserving utilities. In our setting, it coincides with the class of strictly concave law-invariant utilities. A key tool of the analysis is the domination result of Lansberger and Meilijson that states that attention may be restricted to comonotone allocations of aggregate risk. Efficient allocations are characterized as the solutions of utility weighted problems with weights expressed in terms of the asymptotic slopes of the restrictions of agents' utilities to constants. The class of utilities which is used is shown to be stable under aggregation.

Keywords: Law invariant utilities; comonotonicity; Pareto efficiency; equi- libria with short-selling; aggregation; representative agent (search for similar items in EconPapers)
Date: 2011-03-25
New Economics Papers: this item is included in nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-00655172v1
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Citations: View citations in EconPapers (6)

Published in Journal of Mathematical Economics, 2011, 47, pp.328-335. ⟨10.1016/j.jmateco.2010.12.016⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00655172

DOI: 10.1016/j.jmateco.2010.12.016

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