Risk aversion and uniqueness of equilibrium in economies with two goods and arbitrary endowments

DOI10.1515/BEJTE-2021-0150zbMATH Open1521.91110OpenAlexW4304807996MaRDI QIDQ6136265FDOQ6136265

Authors: Andrea Loi, Stefano Matta 

Publication date: 29 August 2023

Published in: The B.E. Journal of Theoretical Economics (Search for Journal in Brave)

Abstract: We study the connection between risk aversion, number of consumers and uniqueness of equilibrium. We consider an economy with two goods and $c$ impatience types, where each type has additive separable preferences with HARA Bernoulli utility function, $u_H(x):=fracgamma1-gammaleft(b+fracagammaxight{)}^{1-gamma}$. We show that if $gammainleft(1,fraccc-1ight]$, the equilibrium is unique. Moreover, the methods used, involving Newton's symmetric polynomials and Descartes' rule of signs, enable us to offer new sufficient conditions for uniqueness in a closed-form expression highlighting the role played by endowments, patience and specific HARA parameters. Finally, new necessary and sufficient conditions in ensuring uniqueness are derived for the particular case of CRRA Bernoulli utility functions with $gamma=3$.

Full work available at URL: https://arxiv.org/abs/2107.01947

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zbMATH Keywords

risk aversionpolynomial approximationuniqueness of equilibriumDescartes' rule of signsexcess demand functionNewton's symmetric polynomials

Mathematics Subject Classification ID

Utility theory (91B16)

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Cited In (3)

• Recent advances on uniqueness of competitive equilibrium
• A new approach to the uniqueness of equilibrium with CRRA preferences
• On the functional equivalence of two perfectly competitive economies with negative exponential utility and linear utility with a quadratic holding cost

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