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Coupled projects, core imputations, and the CAPM

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  • Didrik Flåm, Sjur
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    Abstract

    Projects, private or public, that share input factors or output requirements had better be construed as members of a portfolio. Present risk, the capital asset pricing model may facilitate valuation of each member. Chief results of that model are derived and generalized here as core solutions to a transferable-utility production game. Shadow prices define stochastic discount factors that determine values of individual projects. Variance aversion largely affects such prices whence optimal allocations.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Mathematical Economics.

    Volume (Year): 48 (2012)
    Issue (Month): 3 ()
    Pages: 170-176

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    Handle: RePEc:eee:mateco:v:48:y:2012:i:3:p:170-176

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    Web page: http://www.elsevier.com/locate/jmateco

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    Keywords: Transferable utility; Core solution; Shadow price; Variance aversion; Capital asset pricing; Two-fund separation;

    References

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    1. Alfred Galichon & Ivar Ekeland & Marc Henry, 2009. "Comonotonic measures of multivariates risks," Working Papers, HAL hal-00401828, HAL.
    2. Flåm, S. D. & Ermoliev, Y. M., 2009. "Investment, uncertainty, and production games," Environment and Development Economics, Cambridge University Press, Cambridge University Press, vol. 14(01), pages 51-66, February.
    3. Flåm, Sjur Didrik & Koutsougeras, L., 2007. "Private Information, Transferable Utility, and the Core," Working Papers in Economics, University of Bergen, Department of Economics 04/07, University of Bergen, Department of Economics.
    4. Chamberlain, Gary, 1988. "Asset Pricing in Multiperiod Securities Markets," Econometrica, Econometric Society, Econometric Society, vol. 56(6), pages 1283-1300, November.
    5. Damir Filipović & Michael Kupper, 2008. "Equilibrium Prices For Monetary Utility Functions," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., World Scientific Publishing Co. Pte. Ltd., vol. 11(03), pages 325-343.
    6. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262650401, December.
    7. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, Elsevier, vol. 2(3), pages 225-243, September.
    8. Flam, Sjur & Owen, Guillermo & Saboya, Martha, 2005. "The not-quite non-atomic game: Non-emptiness of the core in large production games," Mathematical Social Sciences, Elsevier, Elsevier, vol. 50(3), pages 279-297, November.
    9. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, Elsevier, vol. 7(3), pages 265-296, September.
    10. Carlier, G. & Dana, R.-A. & Galichon, A., 2012. "Pareto efficiency for the concave order and multivariate comonotonicity," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(1), pages 207-229.
    11. Levy, H & Markowtiz, H M, 1979. "Approximating Expected Utility by a Function of Mean and Variance," American Economic Review, American Economic Association, American Economic Association, vol. 69(3), pages 308-17, June.
    12. Duffie, Darrell, 1991. "The theory of value in security markets," Handbook of Mathematical Economics, Elsevier, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 31, pages 1615-1682 Elsevier.
    13. Chamberlain, Gary, 1983. "A characterization of the distributions that imply mean--Variance utility functions," Journal of Economic Theory, Elsevier, Elsevier, vol. 29(1), pages 185-201, February.
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    Cited by:
    1. Sjur Didrik Flåm, 2013. "Reaching Market Equilibrium Merely by Bilateral Barters," CESifo Working Paper Series, CESifo Group Munich 4504, CESifo Group Munich.

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