A New Look At The Diamond Search Model: Stochastic Cycles And Equilibrium Selection In Search Equilibrium
AbstractWe recast Diamond s search equilibrium model into that with a finitenumber of agents. The state of the model is described by ajump-Markov process, the transition rates of which are functions ofthe reservation cost, which are endogenously determined by valuemaximization by rational agents. The existence of stochasticfluctuations causes the fraction of the employed to move from onebasin of attraction to the other with positive probabilities when thedynamics have multiple equilibria. Stochastic asymmetric cycles thatarise are quite different from the cycles of the set of Diamond Fudenberg nonlineardeterministic differential equations. By taking the number of agents to infinity, we get alimiting probability distribution over the stationary stateequilibria. This provides a natural basis for equilibrium selectionin models with multiple equilibria, which is new in the economicliterature.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 4 (2000)
Issue (Month): 04 (December)
Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_MDYProvider-Email:email@example.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Aoki, Masanao, 2002.
"Open models of share markets with two dominant types of participants,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 49(2), pages 199-216, October.
- Masanao Aoki, 2002. "Open Models of Share Markets with Two Dominant Types of Participants," UCLA Economics Online Papers 107, UCLA Department of Economics.
- Masanao Aoki, 2003. "A Simple Quantity Adjustment Model of Economic Fluctuations and Growth," UCLA Economics Online Papers 232, UCLA Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.