Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 0000-00-00
Number: 99-096/1
Author-Name: Oddvar M. Kaarbøe
Author-Workplace-Name: University of Bergen
Author-Name: Alexander F. Tieman
Author-Email: a.f.tieman@dnb.nl
Author-Workplace-Name: Vrije Universiteit Amsterdam
Title: Equilibrium Selection in Games with Macroeconomic Complementarities
Abstract: We apply the stochastic evolutionary approach of equilibrium selection tomacroeconomic models in which a complementarity at the macro level ispresent. These models often exhibit multiple Pareto-ranked Nash equilibria,and the best response-correspondence of an individual increases with ameasure of the aggregate state of the economy. Our main theoretical resultshows how the equilibrium that is singled out by the evolutionary dynamicsis directly related to the underlying externality that creates themultiplicity problem in the underlying macroeconomic stage game. We alsoprovide clarifying examples from the macroeconomic literature.
Classification-JEL: C63; C72; C73; E19; L16
File-Url: https://papers.tinbergen.nl/99096.pdf
File-Format: application/pdf
File-Size: 332850 bytes
Handle: RePEc:tin:wpaper:19990096