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Inequity Aversion, Financial Markets, and Output Fluctuations

Author

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  • Georg Gebhardt

    (University of Munich and University of Chicago,)

Abstract

Drawing on recent advances in the study of reference dependent utility we model financial markets as a coordination game with multiple equilibria. Asset valuations may change endogenously through re-coordination which induces fluctuations in output. These fluctuations are shown to be quantitatively relevant and inefficient. (JEL: G12) Copyright (c) 2004 The European Economic Association.

Suggested Citation

  • Georg Gebhardt, 2004. "Inequity Aversion, Financial Markets, and Output Fluctuations," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 229-239, 04/05.
  • Handle: RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:229-239
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    Citations

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    Cited by:

    1. Amrei Lahno & Marta Serra-Garcia, 2015. "Peer effects in risk taking: Envy or conformity?," Journal of Risk and Uncertainty, Springer, vol. 50(1), pages 73-95, February.
    2. Klaus M. Schmidt, 2011. "Social Preferences and Competition," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 207-231, August.
    3. Lahno, Amrei M., 2014. "Social anchor effects in decision-making under ambiguity," Discussion Papers in Economics 20960, University of Munich, Department of Economics.
    4. Baghestanian, Sascha & Gortner, Paul J. & van der Weele, Joël J., 2014. "Peer effects and risk sharing in experimental asset markets," SAFE Working Paper Series 67, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    5. Fabio Maccheroni Jr. & Massimo Marinacci Jr. & Aldo Rustichini Jr., 2014. "Pride and Diversity in Social Economies," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 237-271, November.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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