Chapter

Markovian Equilibria in a Dynamic General Equilibrium Model with Heterogeneous Consumers

Subir K. Chakrabarti

in Dimensions of Economic Theory and Policy

Published in print October 2011 | ISBN: 9780198073970
Published online September 2012 | e-ISBN: 9780199081615 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780198073970.003.0002
Markovian Equilibria in a Dynamic General Equilibrium Model with Heterogeneous Consumers

Show Summary Details

Preview

This chapter proves that there exists a sequence of equilibrium prices in a general equilibrium model in which markets meet successively over several periods. The general equilibrium model is that of a pure exchange economy, whereby each consumer receives an endowment vector of the goods available in the economy at the beginning of each period. The endowment vectors are determined in a random manner in each period as a function of the endowment of the preceding period. Such an equilibrium sequence of prices is known as a Markovian equilibrium. This chapter also analyses the existence of equilibria in which the households use such Markov decision rules to determine the amount of consumption and the purchase of capital assets in each period. Finally, it examines the efficiency and welfare properties of these equilibria.

Keywords: Markovian equilibrium; equilibrium prices; general equilibrium model; markets; pure exchange economy; endowment vectors; consumption; capital assets; efficiency; welfare

Chapter.  3096 words. 

Subjects: Microeconomics

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.