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Stationary Markov equilibria for overlapping generations

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  • Felix Kubler

    ()

  • Herakles Polemarchakis

    ()

Abstract

At a stationary Markov equilibrium of a Markovian economy of overlapping generations, prices at a date-event are determined by the realization of the shock, the distribution of wealth and, with production, the stock of capital. Stationary Markov equilibria may not exist; this is the case with intra-generational heterogeneity and multiple commodities or long life spans. Generalized Markov equilibria exist if prices are allowed to vary also with the realization of the shock, prices and the allocation of consumption and production at the predecessor date-event. (Stationary) Markov $ \epsilon $ -equilibria always exist; as $ \epsilon \rightarrow 0, $ allocations and prices converge to equilibrium prices and allocations that, however, need not be stationary. Copyright Springer-Verlag Berlin/Heidelberg 2004

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 24 (2004)
Issue (Month): 3 (October)
Pages: 623-643

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Handle: RePEc:spr:joecth:v:24:y:2004:i:3:p:623-643

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Keywords: Stationary Markov equilibria; $ \epsilon $ -equilibria.;

References

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  1. George M. Constantinides & John B. Donaldson & Rajnish Mehra, 2002. "Junior Can'T Borrow: A New Perspective On The Equity Premium Puzzle," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 269-296, February.
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  5. Hellwig, Martin F., 1983. "A note on the implementation of rational expectations equilibria," Economics Letters, Elsevier, vol. 11(1-2), pages 1-8.
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  7. Duffie, Darrell, et al, 1994. "Stationary Markov Equilibria," Econometrica, Econometric Society, vol. 62(4), pages 745-81, July.
  8. Shapley, Lloyd S & Shubik, Martin, 1977. "An Example of a Trading Economy with Three Competitive Equilibria," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 873-75, August.
  9. Tom Krebs, 2002. "Non-Existence of Recursive Equilibria on Compact State Spaces When Markets are Incomplete," Working Papers 2002-17, Brown University, Department of Economics.
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