An Analysis of Extreme Price Shocks and Illiquidity among Trend Followers

• Main Authors: LEE, Bernard, CHENG, Shih-Fen, KOH, Annie
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Collective model; intrahousehold resource allocation; bargaining; separability; Artificial Intelligence and Robotics; Business; Operations Research, Systems Engineering and Industrial Engineering
• Online Access: https://ink.library.smu.edu.sg/sis_research/1484
• Institution: Singapore Management University

We consdier a collective model of household in which each member has a utility function satisfying the weak separability condition. We show that the separability at the individual level carries over to the house hold level and that the allocation of private goods in any paraeto-efficient allocation can be supported as a Pareto-efficient allocatino of the private sub-problem. We also provide the necessar and sufficient condition for the Pareto weight for the private sub-problem to move in the same direction as the household Pareto weight.