2024/04/16 by Mario Ghossoub, Ghossoub, Mario, Giulio Principi +3
Economics, Econometrics and Finance · #46A20 #46A22 #46N10 #47H99 #47N10 #91B05 #91B30 #91G99 #Computer Science and Game Theory (cs.GT) #Economic theories and models #FOS: Computer and information sciences #FOS: Economics and business #FOS: Mathematics #Functional Analysis (math.FA) #Risk Management (q-fin.RM) #Stochastic processes and financial applications #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2404.10900
openalex publication_date 2024/04/16 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
The classical theory of efficient allocations of an aggregate endowment in a pure-exchange economy has hitherto primarily focused on the Pareto-efficiency of allocations, under the implicit assumption that transfers between agents are frictionless, and hence costless to the economy. In this paper, we argue that certain transfers cause frictions that result in costs to the economy. We show that these frictional costs are tantamount to a form of subadditivity of the cost of transferring endowments between agents. We suggest an axiomatic study of allocation mechanisms, that is, the mechanisms that transform feasible allocations into other feasible allocations, in the presence of such transfer costs. Among other results, we provide an axiomatic characterization of those allocation mechanisms that admit representations as robust (worst-case) linear allocation mechanisms, as well as those mechanisms that admit representations as worst-case conditional expectations. We call the latter Robust Conditional Mean Allocation mechanisms, and we relate our results to the literature on (decentralized) risk sharing within a pool of agents.