Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
No 2005/2:
Efficient Statistical Equilibria in Markets
Kurt Jörnsten ()
and Jan Ubøe ()
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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