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Equilibrium Selection in Games with Macroeconomic Complementarities

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  • Oddvar M. Kaarbøe

    (University of Bergen)

  • Alexander F. Tieman

    ()
    (Vrije Universiteit Amsterdam)

Abstract

We apply the stochastic evolutionary approach of equilibrium selection tomacroeconomic models in which a complementarity at the macro level ispresent. These models often exhibit multiple Pareto-ranked Nash equilibria,and the best response-correspondence of an individual increases with ameasure of the aggregate state of the economy. Our main theoretical resultshows how the equilibrium that is singled out by the evolutionary dynamicsis directly related to the underlying externality that creates themultiplicity problem in the underlying macroeconomic stage game. We alsoprovide clarifying examples from the macroeconomic literature.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 99-096/1.

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Date of creation: 00 0000
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Handle: RePEc:dgr:uvatin:19990096

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  1. Robles, Jack, 1997. "Evolution and Long Run Equilibria in Coordination Games with Summary Statistic Payoff Technologies," Journal of Economic Theory, Elsevier, vol. 75(1), pages 180-193, July.
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  7. Oddvar M. Kaarboe & Alexander F. Tieman, 1999. "Equilibrium Selection under Different Learning Modes in Supermodular Games," Tinbergen Institute Discussion Papers 99-061/1, Tinbergen Institute.
  8. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Droste, E.J.R. & Tuinstra, J., 1998. "Evolutionary Selection of Behavioral Rules in a Cournot Model: A Local Bifurcation Analysis," Discussion Paper 1998-86, Tilburg University, Center for Economic Research.
  10. Cooper, Russell & Haltiwanger, John, 1996. "Evidence on Macroeconomic Complementarities," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 78-93, February.
  11. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  12. Weibull, Jörgen W. & van Damme, Eric, 1998. "Evolution with Mutations Driven by Control Costs," Working Paper Series 501, Research Institute of Industrial Economics.
  13. repec:fth:iniesr:501 is not listed on IDEAS
  14. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July.
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Cited by:
  1. Jacques Durieu & Hans Haller & Philippe Solal, 2011. "Nonspecific Networking," Games, MDPI, Open Access Journal, vol. 2(1), pages 87-113, February.
  2. Durieu, Jacques & Haller, Hans & Solal, Philippe, 2005. "Interaction on Hypergraphs," Sonderforschungsbereich 504 Publications 05-34, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  3. Jacques Durieu & Hans Haller & Philippe Solal, 2004. "Nonspecific Networking," Game Theory and Information 0403005, EconWPA.

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