Comparing Equilibria

Paul Milgrom and John Roberts

American Economic Review, 1994, vol. 84, issue 3, 441-59

Abstract: The authors develop an ordinal approach to comparing the equilibria of economic models. Its main advantages over the traditional approach based on signing derivatives are that it utilizes only a subset of the assumptions, resulting in a simpler theory that facilitates focusing attention on the economics rather than the mathematics; it applies to discrete changes, even when there are multiple equilibria and when some equilibria do not vary smoothly with the parameters; and it incorporates a formal theory of the robustness of conclusions to assumptions, which helps modelers distinguish which assumptions are 'critical' to their comparative-statics conclusions. Copyright 1994 by American Economic Association.

Date: 1994
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