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Indeterminacy of intertemporal equilibria under imperfect competition

Author

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  • Leo Kaas

    () (Department of Economics and Finance, Institute for Advanced Studies, Stumpergasse 56, 1060 Vienna, AUSTRIA)

Abstract

It is known that overlapping generations models with imperfectly competitive firms may exhibit a continuum of stationary equilibria. The reason of this indeterminacy is that different price expectation functions of consumers lead to different objective demand functions against which firms maximize. All these expectation functions fulfill perfect foresight in the equilibrium, but they can be arbitrary off the equilibrium. In this paper it is shown that it is not this arbitrariness which is responsible for the indeterminacy, but that the continuum of stationary equilibria emerges even if expectation functions are rational.

Suggested Citation

  • Leo Kaas, 2001. "Indeterminacy of intertemporal equilibria under imperfect competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 17(2), pages 307-323.
  • Handle: RePEc:spr:joecth:v:17:y:2001:i:2:p:307-323
    Note: Received: March 25, 1999; revised version: February 16, 2000
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    More about this item

    Keywords

    Overlapping generations model; Imperfect competition; Indeterminacy; Expectations.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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