This paper contributes to an important recent debate around expected utility and risk aversion. Rejecting a gamble over a given range of wealth levels imposes a lower bound on risk aversion. Using this lower bound and empirical evidence on the range of the risk aversion coefficient, we calibrate...

Our concern is the extension of the theory of the Shapley value to problems involving externalities. Using the standard axiom systems behind the Shapley value leads to the identification of bounds on players' payoffs around an "externality-free" value. The approach determines the direction and...

We study decentralized trade processes in general exchange economies and house allocation problems with and without money. The processes are subject to persistent random shocks stemming from agents' maximization of random utility. By imposing structure on the utility noise term -logit...

We study a strategic model of dynamic trading where agents are asymmetrically informed over common value sources of uncertainty. There is a continuum of uninformed buyers and a finite number of sellers, some of them informed. When there is only one seller, full information revelation never...

We characterize the Pareto correspondence, the core and the Walras solution using the axioms of consistency, converse consistency and one-person rationality. Consistency and its converse are defined with respect to suitably constructed reduced economies for each case. Our results hold for the...

We study a decentralized matching model in a large exchange economy, in which trade takes place through non--cooperative bargaining in coalitions of finite size. Under essentially the same conditions of core equivalence, we show that the strategic equilibrium outcomes of our model coincide with...

ABSTRACT: Stochastic stability is applied to the problem of exchange. We analyze the stochastic stability of two dynamic trading processes in a simple housing market. In both models, traders meet in pairs at random and exchange their houses when trade is mutually beneficial, but occasionally...

Consider an exchange economy where agents are arbitragers, in that they try to upset allocations imagining plausible beneficial trades. With an introspective algorithm, each agent constructs an interactive choice set (ICS), i.e., a set of bundles that he considers achievable through a sequence...