Scandinavian Working Papers in Economics

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

No 2005/2: Efficient Statistical Equilibria in Markets

Kurt Jörnsten () and Jan Ubøe ()
Additional contact information
Kurt Jörnsten: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Jan Ubøe: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway

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

JEL-codes: D40; D50; G10

19 pages, May 26, 2005

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