IDEAS home Printed from https://ideas.repec.org/p/ecm/wc2000/1526.html
   My bibliography  Save this paper

Dynamic Equilibrium Selection: A General Uniqueness Result

Author

Listed:
  • David M. Frankel

    (Tel Aviv University)

Abstract

This paper shows that in a dynamic context, under weak assumptions, the presence of payoff shocks can shrink the equilibrium set to a singleton. We study a model with a continuum of fully rational agents who switch between two actions or states over time (e.g., working in different sectors, employment vs. unemployment, etc.). An agent's incentive to pick a given action is greater if others do the same. Agents receive chances to change actions at random times and may influence the rate at which these chances arrive. Payoff shocks may follow any of a large class of stochastic processes that includes both seasonal and mean-reverting processes. In this general setting, payoff shocks give rise to a unique equilibrium. One implication is that the introduction of aggregate shocks leads to a unique equilibrium in two well-known macroeconomic search models with multiple equilibria (Diamond and Fudenberg, Howitt and McAfee).

Suggested Citation

  • David M. Frankel, 2000. "Dynamic Equilibrium Selection: A General Uniqueness Result," Econometric Society World Congress 2000 Contributed Papers 1526, Econometric Society.
  • Handle: RePEc:ecm:wc2000:1526
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/RePEc/es2000/1526.pdf
    File Function: main text
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation for Research in Economics, Yale University.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:1526. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/essssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.