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Type | Journal Article |
Scope | Contributions to practice |
Title | Efficiency and equilibria in games of optimal derivative design |
Organization Unit | |
Authors |
|
Item Subtype | Original Work |
Refereed | Yes |
Status | Published in final form |
Language |
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Journal Title | Mathematics and Financial Economics |
Publisher | Springer-Verlag |
Geographical Reach | international |
Volume | 5 |
Page Range | 269 - 297 |
Date | 2011 |
Abstract Text | In this paper, optimal derivative design when multiple firms compete for heterog-enous customers is studied. Ties in the agents’ best responses generate discontinuous payoffs. Efficient tie-breaking rules are considered: In a first step, the model presented by Carlier etal. (Math Financ Econ 1:57–80,2007) is extended, and results of Page and Monteiro (J Math Econ 39:63–109, 2003, J Econ Theory 134:566–575, 2007, Econ Theory 34:503–524, 2008) are used to prove the existence of (mixed-strategies) Nash equilibria. In a second step, thecase of risk minimizing firms is studied. Socially efficient allocations are introduced, andtheir existence is proved. In particular, the entropic risk measure is considered. |
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