arXiv subjects

Bar Light

Publications and source records attributed to Bar Light.

23 records · Page 2Linked to original sources

arXiv2021

The Family of Alpha,[a,b] Stochastic Orders: Risk vs. Expected Value

In this paper we provide a novel family of stochastic orders that generalizes second order stochastic dominance, which we call the $α,[a,b]$-concave stochastic orders. These stochastic orders are generated by a novel set of "very" concave functions where $α$ parameterizes the degree of concavity. The $α,[a,b]$-concave stochastic orders allow us to derive novel comparative statics results for important applications in economics that cannot be derived using previous stochastic orders. In particular, our comparative statics results are useful when an increase in a lottery's riskiness changes the agent's optimal action in the opposite direction to an increase in the lottery's expected value. For this kind of situation, we provide a tool to determine which of these two forces dominates -- riskiness or expected value. We apply our results in consumption-savings problems, self-protection problems, and in a Bayesian game.

math.PR↗

arXiv2021

General equilibrium in a heterogeneous-agent incomplete-market economy with many consumption goods and a risk-free bond

We study a pure-exchange incomplete-market economy with heterogeneous agents. In each period, the agents choose how much to save (i.e., invest in a risk-free bond), how much to consume, and which bundle of goods to consume while their endowments are fluctuating. We focus on a competitive stationary equilibrium (CSE) in which the wealth distribution is invariant, the agents maximize their expected discounted utility, and both the prices of consumption goods and the interest rate are market-clearing. Our main contribution is to extend some general equilibrium results to an incomplete-market Bewley-type economy with many consumption goods. Under mild conditions on the agents' preferences, we show that the aggregate demand for goods depends only on their relative prices and that the aggregate demand for savings is homogeneous of degree in prices, and we prove the existence of a CSE. When the agents' preferences can be represented by a CES (constant elasticity of substitution) utility function with an elasticity of substitution that is higher than or equal to one, we prove that the CSE is unique. Under the same preferences, we show that a higher inequality of endowments does not change the equilibrium prices of goods, and decreases the equilibrium interest rate. Our results shed light on the impact of market incompleteness on the properties of general equilibrium models.

econ.TH↗

arXiv2021

Hermite-Hadamard inequalities for (p,a,b)-convex functions

A function $f:[a,b] \rightarrow \mathbb{R}$ is called $(p,a,b)$-convex if $f$ is $p$ times continuously differentiable, $f^{(p)}$ is convex and increasing, and $f^{(k)}(a)=0$ for all $k=1,\ldots,p$ where $f^{(j)}$ is the $j$th derivative of $f$. In this note we prove Hermite-Hadamard inequalities for $(p,a,b)$-convex functions that are significantly tighter than the classical Hermite-Hadamard inequality. We also prove inequalities for fractional integrals that involve $(p,a,b)$-convex functions.

math.CA↗

arXiv2020

Mean Field Equilibrium: Uniqueness, Existence, and Comparative Statics

The standard solution concept for stochastic games is Markov perfect equilibrium (MPE); however, its computation becomes intractable as the number of players increases. Instead, we consider mean field equilibrium (MFE) that has been popularized in the recent literature. MFE takes advantage of averaging effects in models with a large number of players. We make three main contributions. First, our main result provides conditions that ensure the uniqueness of an MFE. We believe this uniqueness result is the first of its nature in the class of models we study. Second, we generalize previous MFE existence results. Third, we provide general comparative statics results. We apply our results to dynamic oligopoly models and to heterogeneous agent macroeconomic models commonly used in previous work in economics and operations.

econ.TH↗

arXiv2020

Stochastic Comparative Statics in Markov Decision Processes

In multi-period stochastic optimization problems, the future optimal decision is a random variable whose distribution depends on the parameters of the optimization problem. We analyze how the expected value of this random variable changes as a function of the dynamic optimization parameters in the context of Markov decision processes. We call this analysis \emph{stochastic comparative statics}. We derive both \emph{comparative statics} results and \emph{stochastic comparative statics} results showing how the current and future optimal decisions change in response to changes in the single-period payoff function, the discount factor, the initial state of the system, and the transition probability function. We apply our results to various models from the economics and operations research literature, including investment theory, dynamic pricing models, controlled random walks, and comparisons of stationary distributions.

math.OC↗