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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2005/2:
Efficient Statistical Equilibria in Markets

Kurt J÷rnsten () and Jan Ub°e ()

Abstract: In this paper we will study statistical equilibria in commodity markets where agents have a specified utility attached to every transaction in their offer sets. A probability measure on the product of all offer sets is called benefit efficient if market transactions with higher total benefit are more probable. We will characterize all such probability measures and show how this defines a new family of statistical equilibria in commodity markets. If agents are indifferent with respect to utility, these equilibria reduce to the classical entropy maximizing states. Moreover, we show how to construct what we call the most likely explanation for a set of observed commodity prices.

Keywords: Commodity markets; statistical equilibria; efficient probability measures; (follow links to similar papers)

JEL-Codes: D40; D50; G10; (follow links to similar papers)

19 pages, May 26, 2005

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