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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- 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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