Unrealized arbitrage opportunities in naive equilibria with non-Bayesian belief processes
dc.contributor.author | Zimper, Alexander | |
dc.contributor.email | alexander.zimper@up.ac.za | en_US |
dc.date.accessioned | 2024-02-22T06:10:53Z | |
dc.date.available | 2024-02-22T06:10:53Z | |
dc.date.issued | 2023-09 | |
dc.description | DATA AVAILABILITY : No data was used for the research described in the article. | en_US |
dc.description.abstract | A non-Bayesian decision maker forms posterior beliefs through an – ever so slightly – violation of Bayes’ rule. A naive equilibrium is a competitive equilibrium for a multiperiod complete markets economy such that every economic agent – Bayesian or non-Bayesian – assumes that all economic agents are Bayesian decision makers. If all agents are indeed Bayesian decision makers, the naive equilibrium coincides with the standard concept of an arbitrage-free equilibrium for which dynamic price ratios are comprehensively pinned down as the equilibrium price ratios of Arrow–Debreu securities in a static economy. If at least one agent is a non-Bayesian decision maker, however, some equilibrium price ratios will change over time. These changing price ratios imply the existence of unrealized dynamic arbitrage opportunities in a naive equilibrium with non-Bayesian decision makers. | en_US |
dc.description.department | Economics | en_US |
dc.description.librarian | hj2024 | en_US |
dc.description.sdg | SDG-08:Decent work and economic growth | en_US |
dc.description.uri | http://www.elsevier.com/locate/mss | en_US |
dc.identifier.citation | Zimper, A. 2023, 'Unrealized arbitrage opportunities in naive equilibria with non-Bayesian belief processes', Mathematical Social Sciences, vol. 125, pp. 27-41, doi : 10.1016/j.mathsocsci.2023.07.001. | en_US |
dc.identifier.issn | 0165-4896 (print) | |
dc.identifier.issn | 1879-3118 (online) | |
dc.identifier.other | 10.1016/j.mathsocsci.2023.07.001 | |
dc.identifier.uri | http://hdl.handle.net/2263/94811 | |
dc.language.iso | en | en_US |
dc.publisher | Elsevier | en_US |
dc.rights | © 2023 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license. | en_US |
dc.subject | Non-Bayesian updating | en_US |
dc.subject | Dynamic inconsistency | en_US |
dc.subject | Bounded rationality | en_US |
dc.subject | Representative agent | en_US |
dc.subject | Dynamic arbitrage opportunities | en_US |
dc.subject | SDG-08: Decent work and economic growth | en_US |
dc.title | Unrealized arbitrage opportunities in naive equilibria with non-Bayesian belief processes | en_US |
dc.type | Article | en_US |