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Results on the Stability of a Simple Wage Posting Model

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  • Robert Jump

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    Abstract

    This paper presents results on the stability of the wage dispersion model presented in Mortensen (2003). Specifically, we test four 'positive definite' learning processes on a single parameterisation of the underlying model, and submit the most successful to a thorough sensitivity analysis. The general result of existing studies of the stability of price dispersion models is that learning processes can converge on limiting distributions that qualitatively match the equilibrium distribution. In contrast, the most successful process considered in this paper can converge on a limiting distribution that quantitatively matches the equilibrium distribution. financial stability?

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    File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/1319.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 1319.

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    Date of creation: Nov 2013
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    Handle: RePEc:ukc:ukcedp:1319

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    Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
    Phone: +44 (0)1227 764000
    Fax: +44 (0)1227 827850
    Web page: http://www.ukc.ac.uk/economics/

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    Related research

    Keywords: Price dispersion; Search market equilibrium; Reinforcement learning;

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    1. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
    2. Cason, T. & Friedman, D. & Wagener, F.O.O., 2003. "The dynamics of price dispersion, or Edgeworth variations," CeNDEF Working Papers 03-11, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    3. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
    4. Xing Gao & Weijun Zhong & Shue Mei, 2013. "Stochastic Evolutionary Game Dynamics and Their Selection Mechanisms," Computational Economics, Society for Computational Economics, vol. 41(2), pages 233-247, February.
    5. Ian McCarthy, 2008. "Simulating Sequential Search Models with Genetic Algorithms: Analysis of Price Ceilings, Taxes, Advertising and Welfare," Caepr Working Papers 2008-010, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    6. Roger Waldeck & Eric Darmon, 2006. "Can boundedly rational sellers learn to play Nash?," Journal of Economic Interaction and Coordination, Springer, vol. 1(2), pages 147-169, November.
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