Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 175 Abstract:
Game theory is both at the heart of economics and without a definitive solution. This paper proposes a solution. It is argued that a dominance criterion generates a, and perhaps the, generalized equilibrium solution for game theory. First we provide a set theoretic perspective from which to view game theory, and then present and discuss the proposed solution.
Keyword: Nash equilbrium, Dominance, and Equilibria Subject (JEL): C72 - Noncooperative Games, C68 - Computable General Equilibrium Models, and C70 - Game Theory and Bargaining Theory: General
Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 146 Abstract:
The determination of the mechanism for ordering strategies in a game theoretic conflict is the keystone of economic science, at least insofar as economics is to remain an outgrowth of that (otherwise relatively minor) school of English philosophy, Utilitarianism. A method for the solution of the general game is presented in this paper, and the implications for economic theorizing discussed.
Keyword: Multiple equilibria, Political economy, Minimax-Nash, Economic theory, and Games Subject (JEL): C72 - Noncooperative Games and D50 - General Equilibrium and Disequilibrium: General
Creator: Miller, Preston J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 005 Keyword: Consumer consumption and Baumol-Tobin inventory model Subject (JEL): E41 - Demand for Money, D01 - Microeconomic Behavior: Underlying Principles, and C52 - Model Evaluation, Validation, and Selection
Creator: Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 232 Abstract:
A model of a "real" business cycle is produced in which labor market participants possess private information. A class of economies is considered in which interesting cycles cannot arise without private information. A methodology adapted from Kydland and Prescott (1982) is then employed to show that models based on private information can empirically confront salient features of postwar U.S. business cycles. Moreover, this can be done in a way which is consistent with existing microeconomic evidence on wages and labor supply. Finally, it is shown that the important features of the model related to private information are fairly general.
Keyword: Assymetric information, Labor markets, Labor contracts, and Unemployment Subject (JEL): D82 - Asymmetric and Private Information; Mechanism Design and E32 - Business Fluctuations; Cycles
Creator: Anderson, Paul A. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 061 Abstract:
This paper puts forward a method for simulating an existing macroeconometric model while maintaining the additional assumption that individuals form their expectations rationally. This simulation technique is a first response to Lucas' criticism that standard econometric policy evaluation allows policy rules to change but doesn't allow expectations rules to change as economic theory predicts they will. The technique is applied to a version of the St. Louis Federal Reserve Model with interesting results. The rational expectations version of the St. Louis Model exhibits the same neutrality with respect to certain policy rules as small, analytic rational expectations models considered by Lucas, Sargent, and Wallace.
Keyword: Rational expectations theory, Forecasting, and Simulation Subject (JEL): C53 - Forecasting Models; Simulation Methods