Title: Welfare Economy under Rough Sets Information
1Welfare Economy under Rough Sets Information
OR 2006 Karlsruhe
- Takashi Matsuhisa
- Ibaraki National College of Technology
- Ibaraki 312-8508, Japan
- E-mail mathisa_at_ge.ibaraki-ct.ac.jp
September 8, 2006
2Background
- Economy under uncertainty consists of
- Economy
- Trader set, Consumption set, Utility
functions - Uncertainty
- By Exact set information
- Partition structure on a state-space,
or equiv. - Knowledge structure.
- By Rough sets information
- Non-partition structure on a
state-space, or equiv. Belief structure.
3Aim and Scope
- Economy under Exact Sets Information
- Core equivalence theorem There is no incentive
among all traders to improve their equilibrium
allocations. - Fundamental Theorem for Welfare Economy Each
Pareto optimal allocation is an equilibrium
allocation. - Others e.g., No trade theorem There is no trade
among traders if the initial endowments are an
equilibrium. - Economy under Rough Sets Information
- Can we extend these results into the economy
- There are a few extensions of No trade.
- We extend the welfare theorem.
4Purpose
- Rough sets information structure induced from a
belief structure - Economy with belief structure and expectation
equilibria in belief - Characterization of the extended equilibria by
Ex-post Pareto optimal allocations in traders.
5Chronicle of Extensions
Economy
Result
Author(s)
Information sets
Uncertainty
Aumann
Pt (?)??????(Exact set)
Core equiv
(1962)
Geanakoplos
?
Pt non Partition (Ref, Trn Rough set)
No Trade
(1989)
?
Einy et al
Core equiv
Pt Partition(Exact set)
(2000)
Pt non Partition (Ref Rough set)
?
Matsuhisa and Ishikawa (2005)
Core equiv
Pt non Partition(None Rough set)
?
Matsuhisa
Welfare
(2005)
6Outline
- Belief structure and Rough sets information
- Economy on belief
- Expectations equilibrium in Belief
- Fundamental Theorem for Welfare
- Remark
7Economy under Uncertainty
- ltT, S, m, W, e, (Ut)t?T, (pt)t?T, (Pt)t?T,gt
- l the number of commodities
- Rl the consumption set of trader t
- T a finite set of traders t?T
- e TW ? Rl an initial endowment
- Ut RlW ?R ts utility function
- pt subjective prior on W for t?T
- Pt partition on W which represents trader
ts uncertainty
8Economy on Belief
- ltT, W, e, (Ut)t?T, (pt)t?T, (Bt)t?T, (Pt)t?Tgt
- l the number of commodities
- Rl the consumption set
- T a finite set of traders t
- e TW ? Rl an endowment
- Ut RlW ?R ts utility function initial
- pt subjective prior on W for t?T
- lt W, (Bt)t?T, (Pt) t?T gt the belief structure
9Belief structure
lt W, (Bt)t?T, (Pt)t?T gt
- W a non-empty finite set of states
- 2 W?E an event
- T a set of traders
- E ?w E occurs at w
10Belief structure
lt W, (Bt)t?T, (Pt)t?T gt
- ts belief operator Bt 2 W ? 2 W
- Bt E ?w t believes E at w
- ts possibility operator
- Pt 2 W ? 2 W , E ? Pt(E) W \ Bt (W \ E)
- Pt E ?w E is possible for t at w
- Pt(w) Pt(w) ts information set at w
11Livedoor v.s. Fuji TV Japan
L
F
12L-F Example
T L, F
Belief structure
E f w1 w2 W
BL E f w1 w2 W
BF E f w1 f W
13L-F Example
T L, F
The possibility operators
E f w1 w2 W
PL E f w1 w2 W
PF E f W w2 W
The Information Sets Pt(w) Pt(w)
14Rough Set Theory
- An event E is exact if Pt(E) Bt (E)
- An event E is rough if Pt(E) ? Bt(E)
- If ltW, (Bt )gt is the Kripke semantics for Modal
logic S5 then Pt(w)w?W is a partition of W,
and every Pt(w) is exact. - Our interest is the case that Pt(w) does not make
a partition, and so Pt(w) is rough in general.
15Economy on Belief
lt T, S, m, W, e, (Ut)t?T, (pt)t?T, (Bt)t?T,
(Pt)t?Tgt
(A-1) S e (t, w) ? 0
t?T
- Dom (Pt) w Pt(?) ? f
- the domain of Pt
- (A-2) For ?t, Dom (Pt) Dom (Ps) ? f
16Allocations
-
- An assignment x TW ? Rl
- An allocation a TW ? Rl
- S a (t, w) ? S e (t, w)
t ?T
t ?T
17Price and Budget
?(p) the partition of W induced by p
?(p)(w) x p(?) p(w)
the information given by p at w
Budget set of t at w Bt(w, p) x p(w)x ?
p(w)e(t, w)
18Expectations in belief
- ts interim expectation
- EtUt(x (t, )) ?(p)nPt (w)
- ?Ut(x (t, x),x))pt(x ?(p) (w)nPt(w))
- ts ex-ant expectation
- EtUt(x (t, )(w) ?Ut(x (t, x),x))pt(x)
19Expectation equilibrium in belief
(p, x) an expectations equilibrium in belief
(EE1) x(t, w) ? Bt(w, p) (EE2) y(t, w) ? Bt(w,
p) ? EtUt(x(t, ))?(p)nPt(w) ?
EtUt(y(t, ))?(p)nPt(w) (EE3) S x(t, w) S
e(t, w)
if
t?T
t?T
20Existence Theorem for EE
Trader t is risk averse if (A-3) Ut(x , )
strictly increasing, quasi -concave on Rl,
etc
Measurability of Utility (A-4) Ut(x , )
measurable for the finest field generated by Pt
for all t ? T
Theorem 1 Economy on belief with (A-1), (A-2),
(A-3) and (A4). There exists an expectation
equilibrium.
21Question
Question Whats characteristics of the
expectations equilibrium in belief?
Answer 1. Welfare theorem The expectations
equilibrium is an ex-ante Pareto-optimal
Answer 2. Core equivalence The expectations
equilibrium is a core allocation, and vice versa.
22Pareto Optimality
An allocation a ex-ante Pareto optimal
if there is no allocation x such that
(1) ?t?T EtUt(x (t, )) ?
EtUt(a (t, ))
(2) ?s?T EsUs(x (s, )) gtEsUs(a (s,
))
23Welfare Theorem
Economy with belief structure (A-1),
(A-2), (A-3), and (A-4) An allocation a
ex-ante Pareto optimal
For ?p price, (p, a) an expectations
equilibrium for some initial endowments.
?
24 Concluding remark
- Propose an extended economy under rough sets
information. - Emphasize with the epistemic aspect of belief of
the traders - Remove out Partition structure of traders
information. - Extend Fundamental Theorem for Welfare.
- Bounded rationality point of view The relaxation
of the partition structure for players
information can potentially yield important
results in a world with imperfectly Bayesian
agents
25