When cooperation is beneficial to all agents

Paper: arXiv 2604.02862

Authors: Alessandro Doldi, Marco Frittelli, Marco Maggis

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.

Complexity vs Empirical Score

• Math Complexity: 8.5/10
• Empirical Rigor: 1.5/10
• Quadrant: Lab Rats — theoretically deep, empirically untested

Why this score: The paper relies heavily on advanced continuous-time stochastic calculus and semimartingale theory to establish theoretical conditions for Pareto-improving exchanges. However, it is purely theoretical with no empirical data or backtesting, resulting in low empirical rigor and reproducibility scores.

Research Flowchart

  flowchart TD
    A[Research Goal: Evaluate when market exchanges<br/>strictly improve all agents' indirect utility] --> B[Inputs: Preferences, agent endowments &<br/>general semimartingale framework]
    B --> C[Formulate Pareto efficiency &<br/>individual rationality conditions]
    C --> D[Analyze compatibility between agent preferences<br/>and collective pricing measures]
    D --> E[Derive necessary & sufficient condition for<br/>mutually beneficial zero-sum exchanges]
    E --> F[Outcomes: Unified characterization of beneficial cooperation<br/>in discrete & continuous-time markets]