Merton’s financial multi-agent consumption

Article type: Research Article

Authors: Kogan, Konstantin^{a; b;} | Tapiero, Charles S.^c

Affiliations: [a] Department of Management, Bar-Ilan University, Ramat-Gan, 52900, Israel[email protected] | [b] New-York University, USA | [c] New-York University Tandon School of Engineering, Finance and Risk Engineering, USA[email protected]

Correspondence: [*] Corresponding author: E-mail: [email protected]

Abstract: This paper defines a financial differential game framework to a multi-agent financial Merton Model. Unlike the Merton model based on consumption optimization, we assume that consumption expenditures are determined by agents financial commitments to consumption (and thereby, their savings and investments for future consumption). The consumption price is then defined by the aggregate demand for consumption and supply factors (rather than the utility price that each agent is willing to pay). As a result, the Financial Merton multi-agent model presented in this paper points out that consumption decisions depend on consumers strategic strengths.

Keywords: Multiple agents, pricing, Merton’s model, differential games, large markets

DOI: 10.3233/RDA-180047

Journal: Risk and Decision Analysis, vol. 7, no. 3-4, pp. 107-117, 2018