On the equilibrium concept for overlapping generations organizations
AbstractA necessary feature for equilibrium is that beliefs about the behavior of other agents are rational. We argue that in stationary OLG environments this implies that any future generation in the same situation as the initial generation must do as well as the initial generation did in that situation. We conclude that the existing equilibrium concepts in the literature do not satisfy this condition. We then propose an alternative equilibrium concept, organizational equilibrium, that satisfies this condition. We show that equilibrium exists, it is unique, and it improves over autarky without achieving optimality. Moreover, the equilibrium can be readily found by solving a maximization program.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 602.
Date of creation: 2000
Date of revision:
Publication status: Published in Federal Reserve Bank of Minneapolis Staff Report 282
Other versions of this item:
- Edward C. Prescott & Jose-Victor Rios-Rull, 2000. "On the equilibrium concept for overlapping generations organizations," Staff Report 282, Federal Reserve Bank of Minneapolis.
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