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Self-enforcement, heterogeneous agents, and long-run survival

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  • Han, Kookyoung

Abstract

We consider an infinite horizon game in which players have heterogeneous beliefs about future endowments process and trade with each other. Focusing on Pareto-efficient subgame-perfect equilibria, we find that unlike dynamic general equilibrium models, every player’s consumption is bounded away from zero. That is, every player survives in a Pareto-efficient subgame-perfect equilibrium.

Suggested Citation

  • Han, Kookyoung, 2021. "Self-enforcement, heterogeneous agents, and long-run survival," Economics Letters, Elsevier, vol. 204(C).
    • Handle: RePEc:eee:ecolet:v:204:y:2021:i:c:s016517652100183x
    DOI: 10.1016/j.econlet.2021.109906
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    References listed on IDEAS

    as
    1. Yurii Fedyk & Christian Heyerdahl-Larsen & Johan Walden, 2013. "Market Selection and Welfare in a Multi-asset Economy," Review of Finance, European Finance Association, vol. 17(3), pages 1179-1237.
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    5. Massari, Filippo, 2019. "Market selection in large economies: a matter of luck," Theoretical Economics, Econometric Society, vol. 14(2), May.
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    8. Jaroslav Borovička, 2020. "Survival and Long-Run Dynamics with Heterogeneous Beliefs under Recursive Preferences," Journal of Political Economy, University of Chicago Press, vol. 128(1), pages 206-251.
    9. Sihvonen, Markus, 2019. "Market selection with idiosyncratic uncertainty," Journal of Economic Theory, Elsevier, vol. 182(C), pages 143-160.
    10. Hongjun Yan, 2008. "Natural Selection in Financial Markets: Does It Work?," Management Science, INFORMS, vol. 54(11), pages 1935-1950, November.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Market selection; Pareto efficiency; Subgame-perfect equilibrium; Heterogeneous players;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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