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    An Equilibrium Approach to the Aggregation of Beliefs

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    Zhang_Aggregation_of_Beliefs.pdf (177.6Kb)
    Issue Date
    2013-06-01
    Author
    Jin, Yi
    Zhang, Jianbo
    Publisher
    Brill
    Type
    Article
    Article Version
    Scholarly/refereed, author accepted manuscript
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    Abstract
    This paper presents a new answer to the old question of how to aggregate individual beliefs. We construct a model which allows agents to take arbitrage opportunities against the aggregated belief by making contingent claims against the states, and the aggregator (market maker) regulates the probability of states. When all claims from the agents are mutually covered for every realization of the state, an aggregation of individual beliefs is thus obtained. We prove the existence and uniqueness of the equilibrium aggregation, and also show that the aggregate belief lies in the convex hull of individual beliefs. This model allows us to address some important problems such as how individual agent’s attitude toward risk and wealth endowment affect the outcome of the aggregation process, and whether the aggregate belief satisfies the well-known properties like equal treatment.
    Description
    This is the author's accepted manuscript, made available with the permission of the publisher.
    URI
    http://hdl.handle.net/1808/14949
    DOI
    https://doi.org/10.3868/s060-002-013-0003-7
    Collections
    • Economics Scholarly Works [183]
    Citation
    Yi, Jin and Zhang, Jianbo. "An Equilibrium Approach to the Aggregation of Beliefs." Frontiers of Economics in China, Volume 8, Issue 1, pages 50 – 63. http://dx.doi.org/10.3868/s060-002-013-0003-7

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    Contact KU ScholarWorks
    785-864-8983
    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    785-864-8983

    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    Image Credits
     

     

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