IDEAS home Printed from https://ideas.repec.org/a/fec/journl/v8y2013i1p50-63.html
   My bibliography  Save this article

An Equilibrium Approach to the Aggregation of Beliefs

Author

Listed:
  • Yi Jin

    (Department of Economics, University of Monash, Caulfield, VIC 3145, Australia)

  • Jianbo Zhang

    (Department of Economics, University of Kansas, Lawrence, KS 66045, USA)

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.

Suggested Citation

  • Yi Jin & Jianbo Zhang, 2013. "An Equilibrium Approach to the Aggregation of Beliefs," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(1), pages 50-63, March.
    • Handle: RePEc:fec:journl:v:8:y:2013:i:1:p:50-63
    as

    Download full text from publisher

    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-002-013-0003-7
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    aggregation of beliefs; heterogeneous agents; risk attitudes; market equlibrium;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fec:journl:v:8:y:2013:i:1:p:50-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Frank H. Liu (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.