Let Ω be a bounded domain with fractal boundary, for instance von Koch's snowflake domain. First we determine the range and the kernel of the trace on ∂Ω of Sobolev spaces of fractional order defined on Ω. This extends some earlier results of H. Wallin and J. Marschall Secondly we apply these results in studying Dirichlet forms related to subordinate reflecting diffusions in non–smooth domains.
Kreps–Porteus preferences constitute a widely used alternative to time separability. We showin this paper that with these preferences utility maximization does not impose any observable restrictions on a household’s savings decisions or on choices in good markets over time. The additional assumption of a weakly separable aggregator is needed to ensure that the assumption of utility maximization restricts intertemporal choices. Under this assumption, choices in spot marketsare characterized by a strong axiom of revealed preferences (SSARP).Under uncertainty Kreps–Porteus preferences impose observable restrictions on portfolio choice if one observes the last period of an individual’s planning horizon. Otherwise there are no restrictions.
Is general equilibrium theory empirically testable? Our perspective on this question differs fromthe standard, Sonnenschein–Debreu–Mantel (SDM) viewpoint. While the SDM tradition considersaggregate (excess) demand as a function of prices, we suppose that what is observable is the equilibriumprice vector as a function of the fundamentals of the economy.We apply this perspective to anexchange economy where equilibrium prices and individual endowments are observable.We derivenecessary and sufficient conditions that characterize the equilibrium prices, as functions of initialendowments. Furthermore, we show that, if these conditions are satisfied, then the economy cangenerically be identified. Finally, we show that when only aggregate data are available, observablerestrictions vanish.We conclude that the availability of individual data is essential for the derivationof testable consequences of the general equilibrium construct.
At a stationary Markov equilibrium of a Markovian economy of overlapping generations, prices at a date-event are determined by the realization of the shock, the distribution of wealth and, with production, the stock of capital. Stationary Markov equilibria may not exist; this is the case with intra-generational heterogeneity and multiple commodities or long life spans. Generalized Markov equilibria exist if prices are allowed to vary also with the realization of the shock, prices and the allocation of consumption and production at the predecessor date-event. (Stationary) Markov $ \epsilon $ -equilibria always exist; as $ \epsilon \rightarrow 0, $ allocations and prices converge to equilibrium prices and allocations that, however, need not be stationary.
In uniform auctions, buyers chosse demand schedules as strategies and the same "market clearing" price for units awarded. Despite the widespread use of these auctions, the extant theory shows that they are susceptible to arbitrarily large underpricing. We make a realistic modification to the theory by letting prices, quantities, and bids be discrete. We show that underpricing can be made arbitrarily small by choosing a sufficiently small price tick size and a sufficiently large quantitity multiple. We also show how one might improve revenues by modifying the allocation rule. A trivial change in the design can have a dramatic impact on prices. Our conclusions are robust to bidders being capacity constrained. Finally, we examine supply uncertainty robust equilibria.
We contribute to the debate on the optimal design of multiunit auctions by developingand testing robust implications of the leading theory of uniform price auctions on the bid distributions submitted by individual bidders. The theory, which emphasizes market power, has little support in a data set of Finnish Treasury auctions. A reason may be that the Treasury acts strategically by determining supply after observing bids, apparently treating the auctions as a repeated game between itself and primary dealers. Bidder behavior and underpricing react to the volatility of bond returns in a way that suggests bidders adjust for the winner’s curse.
We develop and apply a new method for estimating the economic benefits of an environmental amenity. The method is based upon the notion of estimating the derived demand for a privately traded option to utilize an open access good. In particular, the demand for state fishing licenses is used to infer the benefits of recreational fishing. Using panel data on state fishing license sales and prices for the continental United States over a 15-year period, combined with data on substitute prices and demographic variables, a license demand function is estimated with instrumental variable procedures to allow for the potential endogeneity of administered prices. The econometric results lead to estimates of the benefits of a fishing license, and subsequently to the expected benefits of a recreational fishing day. In contrast with previous studies, which have utilized travel cost or hypothetical market methods, our approach provides estimates that are directly comparable across geographic areas. Our findings show substantial variation in the value of a recreational fishing day across geographic areas in the United States. This suggests that current practice of using benefits estimates from one part of the country in national or regional analyses may lead to substantial bias in benefits estimates.
This paper derives a tax-adjusted discount rate formula with a constant proportion leverage policy, investor taxes, and risky debt. The result depends on an assumption about the treatment of taxlosses in default. We identify the assumption that justiftes the textbook approach of discounting interest tax shields at the cost of debt. We contrast this with an alternative assumption that leads to the Sick (1990) result that these should be discounted at the riskless rate. These two approachesrepresent polar cases. Each generates its results by using a different simplifying assumption, and we explain what determines the correct treatment in practice. We also discuss implementation of the valuation procedure using the capital asset pricing model.
hort-run equilibrium of supply and demand. Assets pay dividends that are partially consumed and partially
reinvested. The traders use fixed-mix investment strategies (portfolio rules), distributing their wealth between
assets in fixed proportions. Our main goal is to identify globally evolutionarily stable strategies, allowing an
investor to “survive,” i.e., to accumulate in the long run a positive share of market wealth, regardless of the
initial state of the market. It is shown that there is a unique portfolio rule with this property—an analogue
of the famous Kelly rule of “betting your beliefs.” A game theoretic interpretation of this result is given.
The paper examines a game-theoretic evolutionary model of an asset market with endogenous equilibrium asset prices. Assets pay dividends that are partially consumed and partially reinvested. The investors use general, adaptive strategies (portfolio rules), distributing their wealth between assets, depending on the exogenous states of the world and the observed history of the game. The main goal is to identify strategies, allowing an investor to "survive," i.e. to possess a positive, bounded away from zero, share of market wealth over the whole infinite time horizon. This work brings together recent studies on evolutionary finance with the classical topic of non-cooperative market games.
