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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): C68  Computable General Equilibrium Models, C72  Noncooperative Games, and C70  Game Theory and Bargaining Theory: General 
Creator: Kollintzas, Tryphon, 1953 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 352 Abstract: This paper derives a variance bounds test for a broad class of linear rational expectations models. According to this test if observed data accords with the model, then a weighted sum of autocovariances of the covariancestationary components of the endogenous state variables should be nonnegative. The new test reinterprets its forefather—West's [1986] variance bounds test— and extends its applicability by not requiring exogenous state variables in order to be tested. The possibility of the test's application to nonlinear models is also discussed.
Keyword: Inventory, Overlapping generations models, and Macroeconomics Subject (JEL): E22  Investment; Capital; Intangible Capital; Capacity and C52  Model Evaluation, Validation, and Selection 
Creator: Uhlig, Harald, 1961 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 342 Abstract: [Please note that the following Greek lettering is improperly transcribed.] If [0,1] is a measure space of agents and X a collection of pairwise uncorrelated random variables with common finite mean U and variance a , one would like to establish a law of large numbers () Xdl = U. In this paper we propose to interpret () as a Pettis integral. Using the corresponding Riemanntype version of this integral, we establish (*) and interpret it as an L2law of large numbers. Intuitively, the main idea is to integrate before drawing an W, thus avoiding wellknow measurability problems. We discuss distributional properties of i.i.d. random shocks across the population. We given examples for the economic interpretability of our definition. Finally, we establish a vectorvalued version of the law of large numbers for economies.
Keyword: Random variable, Khinchines law of large numbers, Pettis integral, L2 law of large numbers, Riemann integral, and Large numbers Subject (JEL): C10  Econometric and Statistical Methods and Methodology: General 
Creator: Uhlig, Harald, 1961 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 342 Abstract: [Please note that the following Greek lettering is improperly transcribed.] If [0,1] is a measure space of agents and X a collection of pairwise uncorrelated random variables with common finite mean U and variance a , one would like to establish a law of large numbers () Xdl = U. In this paper we propose to interpret () as a Pettis integral. Using the corresponding Riemanntype version of this integral, we establish (*) and interpret it as an L2law of large numbers. Intuitively, the main idea is to integrate before drawing an W, thus avoiding wellknow measurability problems. We discuss distributional properties of i.i.d. random shocks across the population. We given examples for the economic interpretability of our definition. Finally, we establish a vectorvalued version of the law of large numbers for economies.
Keyword: Random variable, Khinchines law of large numbers, Pettis integral, L2 law of large numbers, Riemann integral, and Large numbers Subject (JEL): C10  Econometric and Statistical Methods and Methodology: General 
Creator: Smith, Bruce D. (Bruce David), 19542002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 240 Abstract: A model of a labor market is developed in which agents possess private information about their marginal products. As a result, involuntary unemployment may arise as a consequence of attempts by firms to create appropriate selfselection incentives. Moreover, employment lotteries may arise for the same reason despite the fact that, in equilibrium, there is no uncertainty in the model. When employment is random, this is both privately and socially desirable. Finally, it is shown that the unemployment that arises is consistent with (a) procyclical aggregate real wages and productivity, (b) employment that fluctuates (at individual and aggregate levels) much more than real wages.
Keyword: Labor market, Private information, Wages, and Employment Subject (JEL): E24  Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, E12  General Aggregative Models: Keynes; Keynesian; PostKeynesian, and D82  Asymmetric and Private Information; Mechanism Design 
Creator: Sargent, Thomas J. and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 214 Keyword: Private issue inside money, Bimetallism, Symmetallism, Seignorage, Quantity theory of money, and Commodities Subject (JEL): E42  Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems and E52  Monetary Policy 
Creator: Braun, R. Anton and McGrattan, Ellen R. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 527 Keyword: Women, Men, Hours per worker , Homework, Household production, Employment, and Family labor supply Subject (JEL): D13  Household Production and Intrahousehold Allocation and J22  Time Allocation and Labor Supply 
Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 136 Keyword: Supergame, Equilibrium strategy, Long term contracts, and Enduring contracts Subject (JEL): C70  Game Theory and Bargaining Theory: General and J41  Labor Contracts 
Creator: Smith, Bruce D. (Bruce David), 19542002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 260 Keyword: Nominal wages, Monetary payments, Contract, and Trade Subject (JEL): L14  Transactional Relationships; Contracts and Reputation; Networks and J33  Compensation Packages; Payment Methods 
Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 126 Abstract: A model is presented in which demand deposits backed by fractional currency reserves and public insurance can be beneficial. The model uses Samuelson's pure consumptionloans model. The case for demand deposits, reserves, and deposit insurance rests on costs of illiquidity and incomplete information. The effect of deposit insurance depends upon how, and at what cost, the government meets its insurer's obligationsomething which is not specified in practice. It remains possible that demand deposits and deposit insurance are a distortion, and reserve requirements serve only to limit the size of this distortion.
Keyword: Banks, Bond reserve, Bank panic, Insolvency, and Reserve requirements Subject (JEL): E58  Central Banks and Their Policies and G21  Banks; Depository Institutions; Micro Finance Institutions; Mortgages