A Strategic Market Game with Secured Lending

Ioannis Karatzas, Martin Shubik and William D. Sudderth
Additional contact information
Ioannis Karatzas: Columbia University
William D. Sudderth: University of Minnesota

No 1099, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study stationary Markov equilibria for strategic, competitive games, in a market-economy model with one non-durable commodity, fiat money, borrowing/lending through a central bank or a money market, and a continuum of agents. These use fiat money in order to offset random fluctuations in their endowments of the commodity, are not allowed to borrow more than they can pay back (secured lending), and maximize expected discounted utility from consumption of the commodity. Their aggregate optimal actions determine dynamically prices and/or interest rates for borrowing and lending, in each period of play. In equilibrium, random fluctuations in endowment- and wealth-levels offset each other, and prices and interest rates remain constant. As in our related recent work, KSS (1994), we study in detail the individual agents' dynamic optimization problems, and the invariance measures for the associated, optimally controlled Markov chains. By appropriate aggregation, these individual problems lead to the construction of stationary Markov competitive equilibrium for the economy as a whole. Several examples are studied in detail, fairly general existence theorems are established, and open questions are indicated for further research.

Pages: 45 pages
Date: 1995-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Journal of Mathematical Economics (1997), 28(2): 207-247

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d10/d1099.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: A strategic market game with secured lending (1997)
Working Paper: A Strategic Market Game With Secured Lending (1995)
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:cwl:cwldpp:1099

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().