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Markov Perfect Equilibria in the Ramsey Model

We study the Ramsey (1928) model under the assumption that households act strategically. We compute the Markov perfect equilib- rium for this model and compare it to the original, competitive equi- librium and to a strategic open-loop equilibrium proposed by Sorger (2002, 2005b). We show that, if households are identical, strategic behavior has no in°uence on the long run evolution of the economy. If households are heterogeneous, however, the Markov perfect equilib- rium has properties that di®er from those of the competitive and the open-loop equilibrium.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie0610.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0610.

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Date of creation: Oct 2006
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Handle: RePEc:vie:viennp:0610
Contact details of provider: Web page: http://www.univie.ac.at/vwl

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  1. Becker, Robert A. & Foias, Ciprian, 2007. "Strategic Ramsey equilibrium dynamics," Journal of Mathematical Economics, Elsevier, vol. 43(3-4), pages 318-346, April.
  2. Becker, Robert A, 1980. "On the Long-Run Steady State in a Simple Dynamic Model of Equilibrium with Heterogeneous Households," The Quarterly Journal of Economics, MIT Press, vol. 95(2), pages 375-82, September.
  3. Sorger, Gerhard, 2002. "On the Long-Run Distribution of Capital in the Ramsey Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 226-243, July.
  4. Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, vol. 58(2), pages 410-452, December.
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