Creator: Prescott, Edward C. and Ríos-Rull, José-Víctor Series: Advances in dynamic economics Abstract:
A necessary feature for equilibrium is that beliefs about the behavior of other agents are rational. We argue that in stationary OLG environments this implies that any future generation in the same situation as the initial generation must do as well as the initial generation did in that situation. We conclude that the existing equilibrium concepts in the literature do not satisfy this condition. We then propose an alternative equilibrium concept, organizational equilibrium, that satisfies this condition. We show that equilibrium exists, it is unique, and it improves over autarky without achieving optimality. Moreover, the equilibrium can be readily found by solving a maximization program.
Keyword: Rational behavior, Equilibrium, and Overlapping generations Subject (JEL): D51 - Exchange and Production Economies and E13 - General Aggregative Models: Neoclassical
Creator: Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 367 Keyword: Stockman, Risk, Equilibrium, Shocks, Dynamic economy, and Stochastic comparative statistics Subject (JEL): C19 - Econometric and Statistical Methods: Other and E13 - General Aggregative Models: Neoclassical
Creator: Cooley, Thomas F., Hansen, Gary D. (Gary Duane), and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 535 Keyword: Equilibrium and Business cycle Subject (JEL): E13 - General Aggregative Models: Neoclassical and E32 - Business Fluctuations; Cycles