Equilibrium existence in an overlapping generations model with altruistic preferences
AbstractWe prove the existence of a competitive equilibrium in an overlapping generations model in which each generation has a preference ordering over its own and its descendentsâ consumptions. The model is one of pure exchange with many goods in each period and two period lived generations. The bequest from one generation to the next is required to be non-negative and is endogenous. In equilibrium, some sequences of agents of successive generations may be continually âlinkedâ by positive bequests and act as infinitely lived agents. Other sequences of agents may not be so linked and therefore behave as sequences of finite lived agents. We give three examples which illustrate the following points: (i) multiple equilibria may exist some of which resemble those of standard overlapping generations models, whereas in others some sequences of agents behave as if infinitely lived, (ii) multiple steady states of the above two types may exist in which the latter are unstable and the former are stable, and (iii) if agents have preferences given by discounted sums of utilities with different discount rates, then not all sequences of generations can be continually linked and hence behave as infinitely lived agents.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 47 (1989)
Issue (Month): 1 (February)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- S. Rao Aiyagari, 1987. "Equilibrium existence in an overlapping generations model with altruistic preferences," Working Papers 356, Federal Reserve Bank of Minneapolis.
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