A backwardly solvable search equilibrium model

Toru Hokari (), Shigeru Makioka () and Masayuki Yao ()
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Toru Hokari: Faculty of Economics, Keio University
Shigeru Makioka: Graduate School of Economics, Keio University
Masayuki Yao: Graduate School of Economics, Keio University

Economics Bulletin, 2013, vol. 33, issue 1, 234-246

Abstract: So-called “search equilibrium models” typically have multiple equilibria. In almost all studies on these models, only steady states are considered mainly because it is difficult to find non-stationary equilibria. This difficulty does not disappear even if we consider finite-horizon versions of these models. In this note, we propose an approach that might be useful to study non-stationary equilibria in these models. In particular, we consider a discrete-time and finite-horizon version of Diamond's (1982, JPE) model and show how to solve it backwardly. As an illustration, we compute a non-stationary equilibrium of a specific example, which exhibits a three-period cycle.

Keywords: search equilibrium; discrete time; finite horizon; non-stationary equilibria (search for similar items in EconPapers)
JEL-codes: C6 J6 (search for similar items in EconPapers)
Date: 2013-01-25
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