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Shaping Long-Run Expectations In Problems Of Coordination

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  • Fernando Vega Redondo

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

When far-sighted agents may adjust their behavior only gradually , the issue of equilibrium selection in games becomes one of tension between "history" and "expectations". This paper analyzes whether, in this context, a planner may intervene successfully through short-run policies which redirect expectations away from the inertia of undesired history. The possibilities and limitations of such approach to "expectation management" are studied in a game-theoretic framework where both the planner and the population are involved in a struggle to impose their (credible) commitment possibilities.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1993-05.pdf
File Function: Fisrt version / Primera version, 1993
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1993-05.

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Length: 42 pages
Date of creation: Jul 1993
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1993-05

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  1. Weil, Philippe, 1989. "Increasing Returns and Animal Spirits," American Economic Review, American Economic Association, vol. 79(4), pages 889-94, September.
  2. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
  3. Marhuenda, F, 1995. "Distribution of Income and Aggregation of Demand," Econometrica, Econometric Society, vol. 63(3), pages 647-66, May.
  4. Matsui Akihiko & Matsuyama Kiminori, 1995. "An Approach to Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 65(2), pages 415-434, April.
  5. Panagariya, Arvind, 1986. "Increasing returns, dynamic stability, and international trade," Journal of International Economics, Elsevier, vol. 20(1-2), pages 43-63, February.
  6. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October.
  7. Fernando Vega Redondo, 1993. "Shaping Long-Run Expectations In Problems Of Coordination," Working Papers. Serie AD 1993-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  8. Mirman, L.J. & Samuelson, L. & Urbano, A., 1989. "Monopoly Experimentation," Papers 8-89-7, Pennsylvania State - Department of Economics.
    • Mirman, Leonard J & Samuelson, Larry & Urbano, Amparo, 1993. "Monopoly Experimentation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 549-63, August.
  9. Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-31, March.
  10. Jovanovic, Boyan & Rosenthal, Robert W., 1988. "Anonymous sequential games," Journal of Mathematical Economics, Elsevier, vol. 17(1), pages 77-87, February.
  11. Nikolai S. Kukushkin, 1993. "Cournot Oligopoly With "Almost" Identical Convex Costs," Working Papers. Serie AD 1993-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  12. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  13. Fudenberg, Drew & Levine, David, 1983. "Subgame-perfect equilibria of finite- and infinite-horizon games," Journal of Economic Theory, Elsevier, vol. 31(2), pages 251-268, December.
  14. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  15. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  17. Howitt, Peter & McAfee, R Preston, 1988. "Stability of Equilibria with Externalities," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 261-77, May.
  18. Herrero, Carmen & Marco, Maria Carmen, 1993. "Rational equal-loss solutions for bargaining problems," Mathematical Social Sciences, Elsevier, vol. 26(3), pages 273-286, November.
  19. Ethier, Wilfred J, 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica, Econometric Society, vol. 50(5), pages 1243-68, September.
  20. repec:fth:stanho:e-91-14 is not listed on IDEAS
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Cited by:
  1. Oyama, Daisuke, 2006. "Agglomeration under Forward-Looking Expectations: Potentials and Global Stability," MPRA Paper 15239, University Library of Munich, Germany.
  2. Vega-Redondo, Fernando, 1997. "Shaping long-run expectations in problems of coordination," European Journal of Political Economy, Elsevier, vol. 13(4), pages 783-806, December.

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