CaltechTHESIS
  A Caltech Library Service

Equilibrium in dynamic economic models

Citation

Schmidt, David Russell (1994) Equilibrium in dynamic economic models. Dissertation (Ph.D.), California Institute of Technology. doi:10.7907/z723-1j18. https://resolver.caltech.edu/CaltechTHESIS:05162013-103849592

Abstract

The main theme running through these three chapters is that economic agents are often forced to respond to events that are not a direct result of their actions or other agents actions. The optimal response to these shocks will necessarily depend on agents' understanding of how these shocks arise. The economic environment in the first two chapters is analogous to the classic chain store game. In this setting, the addition of unintended trembles by the agents creates an environment better suited to reputation building. The third chapter considers the competitive equilibrium price dynamics in an overlapping generations environment when there are supply and demand shocks.

The first chapter is a game theoretic investigation of a reputation building game. A sequential equilibrium model, called the "error prone agents" model, is developed. In this model, agents believe that all actions are potentially subjected to an error process. Inclusion of this belief into the equilibrium calculation provides for a richer class of reputation building possibilities than when perfect implementation is assumed.

In the second chapter, maximum likelihood estimation is employed to test the consistency of this new model and other models with data from experiments run by other researchers that served as the basis for prominent papers in this field. The alternate models considered are essentially modifications to the standard sequential equilibrium. While some models perform quite well in that the nature of the modification seems to explain deviations from the sequential equilibrium quite well, the degree to which these modifications must be applied shows no consistency across different experimental designs.

The third chapter is a study of price dynamics in an overlapping generations model. It establishes the existence of a unique perfect-foresight competitive equilibrium price path in a pure exchange economy with a finite time horizon when there are arbitrarily many shocks to supply or demand. One main reason for the interest in this equilibrium is that overlapping generations environments are very fruitful for the study of price dynamics, especially in experimental settings. The perfect foresight assumption is an important place to start when examining these environments because it will produce the ex post socially efficient allocation of goods. This characteristic makes this a natural baseline to which other models of price dynamics could be compared.

Item Type:Thesis (Dissertation (Ph.D.))
Subject Keywords:Social sciences
Degree Grantor:California Institute of Technology
Division:Humanities and Social Sciences
Major Option:Social Science
Thesis Availability:Public (worldwide access)
Research Advisor(s):
  • Palfrey, Thomas R.
Thesis Committee:
  • Unknown, Unknown
Defense Date:24 September 1993
Record Number:CaltechTHESIS:05162013-103849592
Persistent URL:https://resolver.caltech.edu/CaltechTHESIS:05162013-103849592
DOI:10.7907/z723-1j18
Default Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:7717
Collection:CaltechTHESIS
Deposited By: John Wade
Deposited On:16 May 2013 18:07
Last Modified:16 Apr 2021 23:30

Thesis Files

[img]
Preview
PDF - Final Version
See Usage Policy.

19MB

Repository Staff Only: item control page