Eductive stability in sequential exchange economies: an introduction

Guesnerie Roger () and Hector Fernando Calvo Pardo ()

DELTA Working Papers from DELTA (Ecole normale supérieure)

Abstract: This paper provides a survey of results concerning "eductive stability" of equilibrium in an abstract 2-period exchange economy. "Eductive stability" is based on the Common Knowledge considerations underlying the work reported in the book "Assessing rational expectations: "eductive" stability in economics" from which this paper is a chapter. "Iteratively Expectational stability" is a necessary condition of "eductive stability": conditions for IE stability as well as for local "eductive stability" are provided and discussed: these conditions stress a key role for the income effects of savings decisions as well as for their sensitivity to relative prices tomorrow.

Date: 2004
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