Survival and Long-Run Dynamics with Heterogeneous Beliefs under Recursive Preferences

Jaroslav Borovička

Journal of Political Economy, 2020, vol. 128, issue 1, 206 - 251

Abstract: I analytically characterize the long-run behavior of an economy with two types of agents who differ in their beliefs and are endowed with homothetic recursive preferences. Agents with more incorrect beliefs dominate, or agents with different accuracy of their beliefs coexist in the long run, for broad ranges of plausible parameterizations when risk aversion is greater than the inverse of the intertemporal elasticity of substitution. The results highlight a crucial interaction between risk sharing, speculative behavior and consumption-saving choice of agents with heterogeneous beliefs, and the role of equilibrium prices in shaping long-run outcomes.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://dx.doi.org/10.1086/704072 (application/pdf)
http://dx.doi.org/10.1086/704072 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Survival and long-run dynamics with heterogeneous beliefs under recursive preferences (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:doi:10.1086/704072

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().