Book ChapterDOI
Dynamic games in macroeconomics
Łukasz Balbus,Kevin Reffett,Łukasz Woźny +2 more
- pp 729-778
TLDR
In this paper, the authors survey how the methods of dynamic and stochastic games have been applied in macroeconomic research, focusing on strategic dynamic programming, which has found extensive application for solving macroeconomic models.Abstract:
In this chapter, we survey how the methods of dynamic and stochastic games have been applied in macroeconomic research. In our discussion of methods for constructing dynamic equilibria in such models, we focus on strategic dynamic programming, which has found extensive application for solving macroeconomic models. We first start by presenting some prototypes of dynamic and stochastic games that have arisen in macroeconomics and their main challenges related to both their theoretical and numerical analysis. Then, we discuss the strategic dynamic programming method with states, which is useful for proving existence of sequential or subgame perfect equilibrium of a dynamic game. We then discuss how these methods have been applied to some canonical examples in macroeconomics, varying from sequential equilibria of dynamic nonoptimal economies to time-consistent policies or policy games. We conclude with a brief discussion and survey of alternative methods that are useful for some macroeconomic problems.read more
Citations
More filters
Bubbles and Self-Enforcing Debt
TL;DR: In this paper, the authors characterize equilibria with endogenous debt constraints for a general equilibrium economy with limited commitment in which the only consequence of default is losing the ability to borrow in future periods.
Journal ArticleDOI
Markov perfect equilibria in a dynamic decision model with quasi-hyperbolic discounting
TL;DR: A discrete-time non-stationary decision model in which the preferences of the decision maker change over time and are described by quasi-hyperbolic discounting is studied, and it is shown that Markov perfect equilibria may be constructed using a generalized policy iteration algorithm.
Posted Content
Strategic Interactions in a One-Sector Growth Model
TL;DR: The effect of dynamic and investment externalities in a one-sector growth model, where two agents interact strategically in the utilization of capital for consumption, savings, and investment in technical progress, is studied.
Journal ArticleDOI
Existence of Nash equilibria in stochastic games of resource extraction with risk-sensitive players
TL;DR: In this article, the authors consider a two-person stochastic game of resource extraction and prove the existence of a symmetric stationary Markov perfect equilibrium under two alternative sets of assumptions.
Journal ArticleDOI
Equilibria in Altruistic Economic Growth Models
TL;DR: A stochastic economic growth model in the form of an intergenerational dynamic game with paternalistic and non-paternalistic components is considered, establishing the existence of Markov perfect equilibria that consist of a consumption strategy and an indirect utility function.
References
More filters
Journal ArticleDOI
Rules Rather than Discretion: The Inconsistency of Optimal Plans
TL;DR: In this paper, it was shown that discretionary policy does not result in the social objective function being maximized, and that there is no way control theory can be made applicable to economic planning when expectations are rational.
Journal ArticleDOI
Golden Eggs and Hyperbolic Discounting
TL;DR: The authors analyzes the decisions of a hyperbolic consumer who has access to an imperfect commitment technology: an illiquid asset whose sale must be initiated one period before the sale proceeds are received.
Book ChapterDOI
Myopia and Inconsistency in Dynamic Utility Maximization
TL;DR: In this article, the authors present a problem which has not heretofore been analysed and provide a theory to explain, under different circumstances, three related phenomena: (1) spendthriftiness; (2) the deliberate regimenting of one's future economic behaviour, even at a cost; and (3) thrift.
Posted Content
Rules, Discretion and Reputation in a Model of Monetary Policy
TL;DR: In this article, the authors develop an example of a reputational equilibrium where the out-comes turn out to be weighted averages of those from discretion and those from the ideal rule.
Journal ArticleDOI
Doing It Now or Later
Ted O'Donoghue,Matthew Rabin +1 more
TL;DR: O'Donoghue et al. as discussed by the authors presented a model for hyperbolic discounting with the concept of doing it now or later (Doing It Now or Later).