Payoff Shocks and Equilibrium Selection with Endogenous Flexibility
AbstractIn dynamic models with multiple equilibria, a central question is how agents coordinate their expectations on a particular outcome. Many dynamic models feature endogenous flexibility: at some cost, agents can adjust their behavior more quickly (e.g., in response to changing market conditions). We show that aggregate payoff shocks eliminate all equilibria but one in a general dynamic setting with endogenous flexibility. The results are applied to a model of development.
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Bibliographic InfoPaper provided by Tel Aviv in its series Papers with number 2001-9.
Length: 41 pages
Date of creation: 2001
Date of revision:
Contact details of provider:
Postal: Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.
Web page: http://econ.tau.ac.il/research/foerder.asp
More information through EDIRC
GAMES ; MACROECONOMICS ; ECONOMIC DEVELOPMENT;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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