Indeterminacy of intertemporal equilibria under imperfect competition

Leo Kaas ()

Economic Theory, 2001, vol. 17, issue 2, pages 307-323

Abstract: It is known that overlapping generations models with imperfectly competitive firms may exhibit a continuum of stationary equilibria. The reason of this indeterminacy is that different price expectation functions of consumers lead to different objective demand functions against which firms maximize. All these expectation functions fulfill perfect foresight in the equilibrium, but they can be arbitrary off the equilibrium. In this paper it is shown that it is not this arbitrariness which is responsible for the indeterminacy, but that the continuum of stationary equilibria emerges even if expectation functions are rational.

Keywords: Overlapping generations model; Imperfect competition; Indeterminacy; Expectations. (search for similar items in EconPapers)
JEL-codes: D43 D84 D91 (search for similar items in EconPapers)
Date: 2000-11-14
Note: Received: March 25, 1999; revised version: February 16, 2000
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