Cognitive biases and the representative agent
| Autor: | Elyès Jouini, Clotilde Napp |
|---|---|
| Přispěvatelé: | CEntre de REcherches en MAthématiques de la DEcision (CEREMADE), Centre National de la Recherche Scientifique (CNRS)-Université Paris Dauphine-PSL, Université Paris sciences et lettres (PSL)-Université Paris sciences et lettres (PSL), Dauphine Recherches en Management (DRM), Université Paris Dauphine-PSL, Université Paris sciences et lettres (PSL)-Université Paris sciences et lettres (PSL)-Centre National de la Recherche Scientifique (CNRS) |
| Jazyk: | angličtina |
| Rok vydání: | 2009 |
| Předmět: |
Distortion function
Computer Science::Computer Science and Game Theory representative agent Cumulative prospect theory ambiguity aversion 05 social sciences ambiguity aversion behavioral agent hyperbolic discounting probability weighting function representative agent neurofinance ambiguity aversion Ambiguity aversion Hyperbolic discounting Representative agent Exponential discounting [SHS.ECO]Humanities and Social Sciences/Economics and Finance 0502 economics and business Economics behavioral agent probability weighting function 050207 economics Time preference neurofinance Mathematical economics Expected utility hypothesis 050205 econometrics hyperbolic discounting |
| Popis: | In this paper, we show that behavioral features can be obtained at a group level when the individuals of the group are heterogeneous enough. Starting from a standard model of Pareto optimal allocations, with expected utility maximizers and exponential discounting, but allowing for heterogeneity among individual beliefs and individual time preference rates, we show that the representative agent has an inverse S-shaped probability distortion function and hyperbolic discount rates. As an application of this result, we show that an agent with a probability weighting function as in Cumulative Prospect Theory (resp. an ambiguity averse agent, resp. an hyperbolic discounting agent) may be represented as a collection of agents with noisy beliefs (resp. heterogeneous beliefs, resp. heterogeneous constant discount rates). |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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