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Existence of Monetary Equilibrium for Overlapping Generations Economies with Satiated Agents

Author

Listed:
  • Ken Urai

    (Graduate School of Economics, Osaka University)

  • Hiromi Murakami

    (Faculty of Economics, Otemon Gakuin University)

  • Takahiro Moriya

    (Department of Economics, Stony Brook University)

Abstract

This paper treats a general equilibrium existence problem on overlapping generations (OLG) economies with satiated agents and fiat money. The setting is important because it allows the analysis to incorporate Pareto optimality problems of the type where the value functions do not necessarily converge. For example, this is the case for optimal allocations such as a basic income under a budget deficit, which can only be realized with policies that require non-negative wealth transfers for all agents. Because of the existence of satiated agents, our argument can be identified with a dividend equilibrium (Aumann and Dreze 1986) or an equilibrium with slack (Mas-Colell 1992). For OLG settings, however, some conditions (like arguments for strictly positive endowments, resource relatedness and minimum wealth conditions with negative prices, and limit arguments for dividends) must be reconsidered. We note that by considering the OLG framework together with satiated agents, not only can the existence of a monetary equilibrium be assumed in advance, but the existence of a monetary equilibrium based on an arbitrary money supply is guaranteed. Taking into account that our setting includes production (without discount factor), the model here provides a basis for a wide range of difficult problems, including the player’s (equilibrium-dependent) survival problem, multi-sectoral capital accumulation, bequests, firm formation, and so on.

Suggested Citation

  • Ken Urai & Hiromi Murakami & Takahiro Moriya, 2022. "Existence of Monetary Equilibrium for Overlapping Generations Economies with Satiated Agents," Discussion Papers in Economics and Business 22-03, Osaka University, Graduate School of Economics.
  • Handle: RePEc:osk:wpaper:2203
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    File URL: http://www2.econ.osaka-u.ac.jp/econ_society/dp/2203.pdf
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    References listed on IDEAS

    as
    1. Allouch, Nizar & Florenzano, Monique, 2013. "Edgeworth rejective core and dividends equilibria of satiated exchange economies," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 1-6.
    2. Kajii, Atsushi, 1996. "How to discard non-satiation and free-disposal with paper money," Journal of Mathematical Economics, Elsevier, vol. 25(1), pages 75-84.
    3. Balasko, Yves & Cass, David & Shell, Karl, 1980. "Existence of competitive equilibrium in a general overlapping-generations model," Journal of Economic Theory, Elsevier, vol. 23(3), pages 307-322, December.
    4. Murakami, Hiromi & Urai, Ken, 2019. "An axiomatic characterization of the price–money message mechanism for economies with satiation," Journal of Mathematical Economics, Elsevier, vol. 82(C), pages 264-271.
    5. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
    6. Hiromi Murakami & Ken Urai, 2017. "Replica core limit theorem for economies with satiation," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(2), pages 259-270, October.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ken Urai & Hiromi Murakami & Daisuke Kobayashi, 2023. "The State Finance and Public Goods from The General Equilibrium Viewpoint: Fundamental Welfare Theorems for Lindahlian General Equilibrium with Money," Discussion Papers in Economics and Business 23-08, Osaka University, Graduate School of Economics.

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    More about this item

    Keywords

    Dividend Equilibrium; Monetary Equilibrium; Overlapping Generations Economy; Satiation; Basic Income.;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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