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Results on the Stability of a Simple Wage Posting Model

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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?

Suggested Citation

  • Robert Jump, 2013. "Results on the Stability of a Simple Wage Posting Model," Studies in Economics 1319, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:1319
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    References listed on IDEAS

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    1. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    2. Roger Waldeck & Eric Darmon, 2006. "Can boundedly rational sellers learn to play Nash?," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 1(2), pages 147-169, November.
    3. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-969, July.
    4. Cason, Timothy N. & Friedman, Daniel & Wagener, Florian, 2005. "The dynamics of price dispersion, or Edgeworth variations," Journal of Economic Dynamics and Control, Elsevier, vol. 29(4), pages 801-822, April.
    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. Xing Gao & Weijun Zhong & Shue Mei, 2013. "Stochastic Evolutionary Game Dynamics and Their Selection Mechanisms," Computational Economics, Springer;Society for Computational Economics, vol. 41(2), pages 233-247, February.
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    More about this item

    Keywords

    Price dispersion; Search market equilibrium; Reinforcement learning;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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