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<p>We propose a novel approach to preference aggregation that accounts for belief disagreements and catastrophe risks. By restricting the Pareto condition to cases involving common beliefs and independent risks—together with another mild axiom—our framework yields a convex aggregation of beliefs and either a linear or a multiplicative aggregation of utilities. Critically, the multiplicative formulation enables catastrophe avoidance, which is essential in contexts such as financial markets where correlated beliefs can lead to systemic risks. Our results further suggest that activities arising from belief heterogeneity, such as speculative trading, may be socially desirable from an ex-post catastrophe avoidance perspective.</p>

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Preference aggregation with heterogeneous beliefs and catastrophe risk

  • 期刊论文

  • 发表日期：

    2025年8月26日

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  • Weijia Wang

摘要

We propose a novel approach to preference aggregation that accounts for belief disagreements and catastrophe risks. By restricting the Pareto condition to cases involving common beliefs and independent risks—together with another mild axiom—our framework yields a convex aggregation of beliefs and either a linear or a multiplicative aggregation of utilities. Critically, the multiplicative formulation enables catastrophe avoidance, which is essential in contexts such as financial markets where correlated beliefs can lead to systemic risks. Our results further suggest that activities arising from belief heterogeneity, such as speculative trading, may be socially desirable from an ex-post catastrophe avoidance perspective.