Equilibrium Selection in Games with Macroeconomic Complementarities

Oddvar Kaarboe () and Alexander Tieman

No 99-096/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

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.

JEL-codes: C63 C72 C73 E19 L16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Equilibrium Selection in Games with Macroeconomic Complementarities (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:19990096

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