Michael Zierhut
Kyoto Institute of Economic Research
Kyoto University
Yoshida Honmachi, Sakyo-Ku
Kyoto 606-8501, Japan

on leave from:
Institute of Financial Economics
Humboldt University
Dorotheenstr. 1
10099 Berlin, Germany
Email: michael.zierhut@hu-berlin.de
Research Areas
(in alphabetical order)
Decision Theory, General Equilibrium Theory, Imperfect Competition, Matching Theory
Curriculum Vitae
Financial Intermediation and the Welfare Theorems in Incomplete Markets
(jointly with Marc Oliver Bettzüge and Thorsten Hens)
Economic Theory, 73(2-3), 2022 [ Link ]
In production economies with incomplete markets, shareholders disagree about the objective of the firm. We show that a weak financial intermediary, who is unable to complete markets, can offer just enough spanning to resolve this disagreement. The intermediary is limited to offering one customized contract per consumer. Knowledge of demand functions is sufficient for offering the right contracts. Once agreement among shareholders is reached, productive efficiency is restored, which in turn permits a Pareto efficient market outcome. This result shows that the first welfare theorem does not depend on complete spanning, but merely on institutions that provide the right span. However, this cannot be said about the second welfare theorem: For some wealth distributions, equilibria with transfers fail to exist due to nonconvexities caused by market incompleteness.
Indeterminacy of Cournot-Walras Equilibrium with Incomplete Markets
Economic Theory, 71(1), 2021 [ Link ]
This paper studies a sole proprietorship economy with imperfect competition in a transferable utility setting. While consumers behave as price takers, producers issue real assets strategically to maximize their own utility. Even when complete markets are technologically feasible, equilibria with incomplete markets are robust, and they appear in large numbers: There is a continuum of equilibria with different asset spans that can be welfare-ranked. This real indeterminacy does not vanish as the number of producers goes to infinity. Therefore, the self-interest of producers restricts economic outcomes but does not determine them.
Generic Regularity of Differentiated Product Oligopolies
Economic Theory, 71(1), 2021 [ Link ]
In oligopoly models with differentiated products, producers face a market demand function that reflects the preferences of consumers. However, typical assumptions on preferences place only weak restrictions on the shape of aggregate demand. This may result in profit functions that are not strictly quasi-concave, in best-reply correspondences that are not differentiable, and in equilibria that are not robust to perturbations. This paper establishes differentiability and robustness as a generic property: For an open, dense set of economies, best replies are differentiable in a neighborhood of equilibria, which is a precondition for comparative statics. All these economies have a finite number of equilibria in pure strategies.
Nonexistence of Constrained Efficient Production Plans
Journal of Mathematical Economics, 83, 2019 [ Link ]
Any normative theory is based on a standard of social welfare. When markets are incomplete, the usual standard is constrained efficiency: A planner who may only use traded assets for transfers of future income cannot achieve a Pareto improvement. This paper points out that constrained efficiency is a weak basis for the normative theory of the firm. Unless short sales are restricted, a constrained Pareto optimum need not exist. This nonexistence problem is robust to perturbations of endowments and leads to surprising economic outcomes: Even though Drèze equilibria are the only candidates for constrained efficient plans, all of them can be Pareto dominated by equilibria with alternative objectives of the firm.
Constrained Efficiency versus Unanimity in Incomplete Markets
Economic Theory, 64(1), 2017 [ Link ]
In production economies with incomplete markets, shareholders disagree about optimal production plans, and there is no natural objective of the firm. From a normative perspective, the firm should choose plans that lead to a constrained Pareto efficient allocation. From a positive perspective, all decisions of the firm should be supported by a majority of shareholders. This paper asks whether one can design objectives for the firm that meet both normative and positive criteria. The answer is negative: Constrained efficient production plans would generically be turned down by a majority of shareholders. This finding is related to the generic non-existence of Makowski equilibria.
Partially Revealing Rational Expectations Equilibrium with Real Assets and Binding Constraints
Economic Theory 62(3), 2016 [ Link ]
This paper studies partially revealing rational expectations equilibria. In a setting with a finite state space and a competitive market for real assets, there exists an open set of economies with such equilibria. They arise when informed agents have corner solutions. When partially revealing and fully revealing equilibria coexist, all Pareto constellations are possible: the partially revealing may Pareto dominate the fully revealing, the fully revealing may Pareto dominate the partially revealing, or the two cannot be Pareto ranked.
Comment on "Collateral Premia and Risk Sharing under Limited Commitment"
Economic Theory Bulletin 2(1), 2014 [ Link ]
In a recent issue of Economic Theory, Kilenthong (Econ Theory 46:475-501, 2011) studies the problem of a social planner who can redistribute future consumption by changing agents’ asset portfolios subject to individual collateral constraints. One of the findings is that aggregate consumption good endowment and collateral asset payoffs together imply a minimum level of aggregate collateral beyond which optimal allocations exhibit full risk sharing. However, this result is incorrect. In the present note it is shown by means of a counterexample that: (1) when such a minimum level exists, it depends on the welfare weights, (2) such a minimum level need not exist.