Economic Theory

, Volume 68, Issue 4, pp 787–810 | Cite as

Normative inference in efficient markets

  • Marek WeretkaEmail author
Research Article


This paper develops a nonparametric method to infer social preferences over policies from prices of securities when agents have non-stationary heterogeneous preferences. We allow for arbitrary efficient risk-sharing mechanisms, formal and informal, and consider a large class of policies. We present a condition on the distribution of aggregate wealth that is necessary and sufficient for the revelation of social preferences over a universal set of policies. We also provide a weaker condition that is sufficient for revelation of social preferences for an arbitrary finite collection of policies.


Social preferences Normative predictions Asset prices 

JEL Classification

D43 D53 G11 G12 L13 


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Wisconsin-MadisonMadisonUSA
  2. 2.FAME|GRAPEWarsawPoland

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