Takashi Hayashi

Regret aversion and opportunity dependence

This paper provides an axiomatic model of decision making under uncertainty in which the decision maker is driven by anticipated ex post regrets. Our model allows both regret aversion and likelihood judgement over states to coexist. Also, we characterize two special cases, minimax regret with multiple priors that generalizes Savages minimax regret, and a smooth model of regret aversion.

Intertemporal substitution and recursive smooth ambiguity preferences

In this paper, we establish an axiomatically founded generalized recursive smooth ambiguity model that allows for a separation among intertemporal substitution, risk aversion, and ambiguity aversion. We axiomatize this model using two approaches: the second-order act approach a la Klibanoff et al. (2005) and the twostage randomization approach a la Seo (2009). We characterize risk attitude and ambiguity attitude within these two approaches. We then discuss our model’s application in asset pricing. Our recursive preference model nests some popular models in the literature as special cases.

Gains from trade

In a social choice context, we ask whether there exists a rule in which nobody loses under trade liberalization. We consider a resource allocation problem in which the traded commodities vary. We propose an axiom stating that enlarging the set of tradable commodities hurts nobody. We show that if a rule satisfies this axiom, together with an allocative efficiency axiom and an institutional constraint axiom stating that only preferences over tradable commodities matter, gains from trade can be given to only one individual in the first step of liberalization.

Preference aggregation under uncertainty: Savage vs. Pareto

Following Mongin [12, 13], we study social aggregation of subjective expected utility preferences in a Savage framework. We argue that each of Savages P3 and P4 and incompatible with the Strong Pareto property. A representation theorem for social preferences satisfying Pareto indifference and conforming to the state-dependent expected utility model is provided.

Quasi-stationary cardinal utility and present bias

Abstract This note gives an axiomatic foundation for utility exhibiting quasi-geometric discounting. In addition, it introduces a wider class of utility functions satisfying weakened stationarity, called quasi-stationary utility . Both are established as von Neumann–Morgenstern utility indices in a model of risk preference.

Choice and individual welfare

We propose an abstract method of systematically assigning a “rational” ranking to non-rationalizable choice data. Our main idea is that any method of ascribing welfare to an individual as a function of choice is subjective, and depends on the economist undertaking the analysis. We provide a simple example of the type of exercise we propose. Namely, we define an individual welfare functional as a mapping from stochastic choice functions into weak orders. A stochastic choice function (or choice distribution) gives the empirical frequency of choices for any possible opportunity set (framing factors may also be incorporated into the model). We require that for any two alternatives x and y, if our individual welfare functional recommends x over y given two distinct choice distributions, then it also recommends x over y for any mixture of the two choice distributions. Together with some mild technical requirements, such an individual welfare functional must weight every opportunity set and assign a utility to each alternative x which is the sum across all opportunity sets of the weighted probability of x being chosen from the set. It therefore requires us to have a “prior view” about how important or representative a choice of x at a given situation is.

Preference Aggregation With Incomplete Information

We show in an environment of incomplete information that monotonicity and the Pareto property applied only when there is common knowledge of Pareto dominance imply (i) there must exist a common prior over the smallest common knowledge event, and (ii) aggregation must be ex ante and ex post utilitarian with respect to that common prior and individual von Neumann–Morgenstern utility indices.

Smallness of a Commodity and Partial Equilibrium Analysis

Partial equilibrium analysis has a conceptual dilemma that its object should be negligibly small in order to be free from income effect but then the consumer does not care for it and the notion of willingness to pay for it does not make sense. In the setting of a continuum of commodities, we propose a limiting procedure which transforms the general many-commodity framework into a partial single-commodity framework. In the limit, willingness to pay for a commodity is established as a density notion and it is shown to be free from income effect. This pins down an exact relationship between general equilibrium analysis and partial equilibrium analysis.

Nash implementation of competitive equilibria in the job-matching market

This paper studies Nash implementation in the job-matching market where each worker works for only one firm and a firm hires as many workers as it wishes. We show that the competitive equilibrium correspondence (CEC) is the smallest Nash implementable correspondence satisfying individual rationality and Pareto indifference. Furthermore, the CEC is the minimal monotonic extension of the worker-optimal and firm-optimal subcorrespondences. We offer two “good” mechanisms that implement this correspondence in Nash equilibrium.

A Generalization of Continuity and Convexity Conditions for Correspondences in Economic Equilibrium Theory

Fixed-point theorems for multi-valued mappings and economic equilibrium existence theorems are generalized from the viewpoint that the continuity and/or convexity assumptions on a mapping may be replaced by weaker local conditions on the vector field defined by the mapping. The generalization gives us natural conditions on individual (possibly non-ordered) preferences or aggregated demand behaviours so that we may obtain several extensions of recent results in social and game-theoretic equilibrium theories. n n n nJEL Classification Numbers: C60, C62, C72, D50, D51.