When cooperation is beneficial to all agents

TL;DR

This paper explores how cooperation among agents can improve their utilities within a semimartingale market framework, providing conditions for beneficial exchanges and clarifying when cooperation is advantageous.

Contribution

It establishes a necessary and sufficient condition for beneficial agent exchanges based on preferences and pricing measures, applicable to continuous and discrete models.

Findings

Identifies when cooperation improves agents' indirect utilities.

Provides a characterization of exchange conditions in market models.

Clarifies the link between collective efficiency and individual rationality.

Abstract

Within a general semimartingale framework, we study the relationship between collective market efficiency and individual rationality. We derive a necessary and sufficient condition for the existence of (possibly zero-sum) exchanges among agents that strictly increase their indirect utilities and characterize this condition in terms of the compatibility between agents' preferences and collective pricing measures. The framework applies to both continuous- and discrete-time models and clarifies when cooperation leads to a strict improvement in each participating agent's indirect utility.