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Agent Behaviour, Financial Market and Welfare Theory

Author

Listed:
  • Bernard Paranque

    (Euromed Marseille Ecole de Management)

  • Walter Baets

    (Euromed Marseille Ecole de Management)

  • Henry Pruden

    (Euromed Marseille Ecole de Management)

Abstract

An important literature has pointed out the coordination problems faced by the agents, in particular the financial one when they have to manage risk and their portfolio. If we follow Kaldor and its definition of speculation, then we could point out that in this case agents are short term oriented because they have to face to an uncertain reality: uncertainty about the behaviour of their competitors at present time and in the future, and uncertainty about the future reality which will be built by their own decision and action. Then each agent tries to anticipate the behaviour of the others, on one hand to do the same (then in average it is a way to avoid lost), on another hand to try to find an opportunity which has not been seen by the other (the way to earn money, doing what the other can’t or may not do), that means mimetic versus opportunism (or free rider behaviour). In both case, we have a kind of reproduction of habits without any collective perspective. The latent hypothesis is that individual decision produces the people satisfaction, the social welfare. We thinks there are three reasons to disagree with this hypothesis ( cancelling that it does not work in reality): a lack of specific tool allowing us to anticipate change and communicate about it; a lack of understanding “what is the common reality”; a lack of an agreement on “what and how can we do together”. That means that we need to understand that rules are not a constraint like they could be in the contract theory but more a through out line to help us to coordinate a collective action

Suggested Citation

  • Bernard Paranque & Walter Baets & Henry Pruden, 2005. "Agent Behaviour, Financial Market and Welfare Theory," Finance 0508001, University Library of Munich, Germany, revised 02 Aug 2005.
  • Handle: RePEc:wpa:wuwpfi:0508001
    Note: Type of Document - pdf; pages: 9. Presented at the 4th Global Conference on Business & Economics, Sponsored by Association for Business & Economic Research and International Journal of Busines s & Economics - June 26-28, 2005 - Oxford University, Oxford, UK
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    More about this item

    Keywords

    Financial behaviour ; holism ; agent ; financial market ; social welfare ; value maximization ; stakeholder;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D6 - Microeconomics - - Welfare Economics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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