Ruling Out Multiplicity of Smooth Equilibria in Dynamic Games: A Hyperbolic Discounting Example
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Título: | Ruling Out Multiplicity of Smooth Equilibria in Dynamic Games: A Hyperbolic Discounting Example |
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Autor/es: | Maliar, Lilia | Maliar, Serguei |
Grupo/s de investigación o GITE: | Análisis Económico |
Centro, Departamento o Servicio: | Universidad de Alicante. Departamento de Fundamentos del Análisis Económico |
Palabras clave: | Hyperbolic discounting | Quasi-geometric discounting | Time inconsistency | Markov perfect equilibrium | Markov games | Turnpike theorem | Neoclassical growth model | Endogenous gridpoints | Envelope condition |
Área/s de conocimiento: | Fundamentos del Análisis Económico |
Fecha de publicación: | jun-2016 |
Editor: | Springer Science+Business Media New York |
Cita bibliográfica: | Dynamic Games and Applications. 2016, 6(2): 243-261. doi:10.1007/s13235-015-0177-8 |
Resumen: | The literature that conducts numerical analysis of equilibrium in models with hyperbolic (quasi-geometric) discounting reports difficulties in achieving convergence. Surprisingly, numerical methods fail to converge even in a simple, deterministic optimal growth problem that has a well-behaved, smooth closed-form solution. We argue that the reason for nonconvergence is that the generalized Euler equation has a continuum of smooth solutions, each of which is characterized by a different integration constant. We propose two types of restrictions that can rule out the multiplicity: boundary conditions and shape restrictions on equilibrium policy functions. With these additional restrictions, the studied numerical methods deliver a unique smooth solution for both the deterministic and stochastic problems in a wide range of the model’s parameters. |
Patrocinador/es: | Lilia Maliar and Serguei Maliar acknowledge support from the Hoover Institution and Department of Economics at Stanford University, University of Alicante, Santa Clara University and MECD Grant ECO2012-36719. |
URI: | http://hdl.handle.net/10045/62608 |
ISSN: | 2153-0785 (Print) | 2153-0793 (Online) |
DOI: | 10.1007/s13235-015-0177-8 |
Idioma: | eng |
Tipo: | info:eu-repo/semantics/article |
Derechos: | © Springer Science+Business Media New York 2015. The final publication is available at Springer via http://dx.doi.org/10.1007/s13235-015-0177-8 |
Revisión científica: | si |
Versión del editor: | http://dx.doi.org/10.1007/s13235-015-0177-8 |
Aparece en las colecciones: | INV - Análisis Económico - Artículos de Revistas |
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2016_Maliar_DynGamesAppl_final.pdf | Versión final (acceso restringido) | 711,54 kB | Adobe PDF | Abrir Solicitar una copia |
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