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Dynamic Pareto Optima in Multi-Period Pure-Exchange Economies

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  • Brandon Tam
  • Mario Ghossoub
  • Silvana M. Pesenti

Abstract

We study a problem of optimal allocation in a discrete-time multi-period pure-exchange economy, where agents have preferences over stochastic endowment processes that are represented by strongly time-consistent dynamic risk measures. We introduce the notion of dynamic Pareto-optimal allocation processes and show that such processes can be constructed recursively starting with the allocation at the terminal time. We further derive a comonotone improvement theorem for allocation processes, and we provide a recursive approach to constructing comonotone dynamic Pareto optima when the agents' preferences are coherent and satisfy a property that we call equidistribution-preserving. In the special case where each agent's dynamic risk measure is of the distortion type, we provide a closed-form characterization of comonotone dynamic Pareto optima. We illustrate our results in a two-period setting.

Suggested Citation

  • Brandon Tam & Mario Ghossoub & Silvana M. Pesenti, 2026. "Dynamic Pareto Optima in Multi-Period Pure-Exchange Economies," Papers 2603.19414, arXiv.org.
    • Handle: RePEc:arx:papers:2603.19414
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    5. repec:dau:papers:123456789/361 is not listed on IDEAS
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