A backwardly solvable search equilibrium model
So-called “search equilibrium models” typically have multiple equilibria. In almost all studies on these models, only steady states are considered mainly because it is diﬃcult to ﬁnd non-stationary equilibria. This diﬃculty does not disappear even if we consider ﬁnite-horizon versions of these models. In this note, we propose an approach that might be useful to study non-stationary equilibria in these models. In particular, we consider a discrete-time and ﬁnite-horizon version of Diamond's (1982, JPE) model and show how to solve it backwardly. As an illustration, we compute a non-stationary equilibrium of a speciﬁc example, which exhibits a three-period cycle.
Volume (Year): 33 (2013)
Issue (Month): 1 ()
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- P. Diamond, 1980.
"Aggregate Demand Management in Search Equilibrium,"
268, Massachusetts Institute of Technology (MIT), Department of Economics.
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