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Random Matching and Aggregate Uncertainty

Robert Molzon () and Daniela Puzzello

MPRA Paper from University Library of Munich, Germany

Abstract: Random matching is often used in economic models as a means of introducing uncertainty in sequential decision problems. We show that random matching schemes that satisfy standard conditions on proportionality are not unique. Two examples show that in a simple growth model, radically di¤erent optimal behavior can result from distinct matching schemes satisfying identical proportionality conditions. That is, non-uniqueness has interesting economic implications since it a¤ects the reward and the transi- tion structures. We propose information entropy as a natural method for selecting unique matching structures for these models. Next, we give conditions on the reward and transition structures of sequential decision models under which the models are not a¤ected by non-uniqueness of the matching scheme.

JEL-codes: C73 D83 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-dge and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8603

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