Asset pricing and computational complexity

Asset pricing when securities valuation is computationally hard


We study asset pricing when valuation of securities requires agents to solve instances of a computationally hard problems. This problem formalizes valuation of a firm when the latter is viewed as a set of projects. Tension emerges between absence of arbitrage at the market level and computationally effective solution procedures at the individual level. We study how computational hardness (computational complexity) affects individual behaviour, dissemination of information, prices and allocations. We are also interested in developing market designs that may improve problem solving through markets and have discovered several designs that significantly increase problem solving performance.

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