Markov Perfect Equilibria in the Ramsey Model

Paul Pichler () and Gerhard Sorger
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Paul Pichler: https://econ.univie.ac.at

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: We study the Ramsey (1928) model under the assumption that households act strategically. We compute the Markov perfect equilibrium for this model and compare it to the original, competitive equilibrium and to a strategic open-loop equilibrium proposed by Sorger (2002, 2005b). We show that, if households are identical, strategic behavior has no influence on the long run evolution of the economy. If households are heterogeneous, however, the Markov perfect equilibrium has properties that differ from those of the competitive and the open-loop equilibrium.

Keywords: Ramsey model; strategic saving; Markov perfect equilibrium (search for similar items in EconPapers)
JEL-codes: C63 C73 D91 E21 O41 (search for similar items in EconPapers)
Date: 2006-10
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