An Experimental Comparison of Two Exchange Economies: Long-Lived Asset vs. Short-Lived Asset
| Autor: | Enrica Carbone, John D. Hey, Tibor Neugebauer |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
050208 finance
General equilibrium theory Strategy and Management Keynesian economics 05 social sciences Consumption smoothing Management Science and Operations Research Intertemporal choice 0502 economics and business Economics Exchange economy Bond market Asset (economics) 050207 economics Herfindahl index |
| Zdroj: | Management Science. 67:6946-6962 |
| ISSN: | 1526-5501 0025-1909 |
| Popis: | The Lucas tree model [Lucas RE Jr (1978) Asset prices in an exchange economy. Econometrica 46(6):1429–1445.] lies at the heart of modern macrofinance. At its core, it provides an analysis of the equilibrium price of a long-lived asset in an exchange economy where consumption is the objective and the sole purpose of the asset is to smooth consumption through time. Experimental tests of the model use a particular instantiation of the Lucas model. Here we adopt a different instantiation to the first two, extending their analyses from a two-period oscillating world to a three-period cyclical world; this is partly to test the robustness of their results. We also go one step further and compare this solution (to a consumption-smoothing problem), in which consumption claims are traded via the long-lived asset, with the alternative solution provided by a market, in which agents can directly trade (short-lived) consumption claims between periods. We find that the latter exchange economy is more efficient in encouraging consumption smoothing than the economy with the long-lived asset. We find evidence of uncompetitive trading in both markets. This paper was accepted by Yan Chen, decision analysis. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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