Approximate versus Exact Equilibria in Dynamic Economies
AbstractThis paper develops theoretical foundations for an error analysis of approximate equilibria in dynamic stochastic general equilibrium models with heterogeneous agents and incomplete financial markets. While there are several algorithms that compute prices and allocations for which agents' first-order conditions are approximately satisfied ("approximate equilibria"), there are few results on how to interpret the errors in these candidate solutions and how to relate the computed allocations and prices to exact equilibrium allocations and prices. We give a simple example to illustrate that approximate equilibria might be very far from exact equilibria. We then interpret approximate equilibria as equilibria for close-by economies; that is, for economies with close-by individual endowments and preferences. Copyright The Econometric Society 2005.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 73 (2005)
Issue (Month): 4 (07)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Raad, Rodrigo Jardim, 2013. "Approximate Recursive Equilibrium with Minimal State Space," Economics Working Papers (Ensaios Economicos da EPGE) 737, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Alessandro Citanna & Paolo Siconolfi, 2008. "On the nonexistence of recursive equilibrium in stochastic OLG economies," Economic Theory, Springer, vol. 37(3), pages 417-437, December.
- P. Siconolfi & A. Citanna, 2007. "Recursive equilibrium in stochastic OLG economies," 2007 Meeting Papers 777, Society for Economic Dynamics.
- Espen Henriksen & Stephen Spear, .
"Endogenous Market Incompleteness Without Market Frictions: Dynamic Suboptimality of Competitive Equilibrium in Multiperiod Overlapping Generations Economies,"
GSIA Working Papers
2005-E37, Carnegie Mellon University, Tepper School of Business.
- Henriksen, Espen & Spear, Stephen, 2012. "Endogenous market incompleteness without market frictions: Dynamic suboptimality of competitive equilibrium in multiperiod overlapping generations economies," Journal of Economic Theory, Elsevier, vol. 147(2), pages 426-449.
- D'Agata, Antonio, 2012. "Existence of an exact Walrasian equilibrium in nonconvex economies," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(12), pages 1-16.
- D'Agata, Antonio, 2011. "Existence of exact Walrasian equilibria in non convex economies," Economics Discussion Papers 2011-47, Kiel Institute for the World Economy.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.