Rational Expectations Business Cycles in Search Equilibrium | Zendy

Peter Dia­mond | Zendy; Drew Fudenberg | Zendy

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Rational Expectations Business Cycles in Search Equilibrium

Author(s) -

Peter Diamond,

Drew Fudenberg

Publication year - 1989

Publication title -

journal of political economy

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 21.034

H-Index - 186

eISSN - 1537-534X

pISSN - 0022-3808

DOI - 10.1086/261618

Subject(s) - barter , economics , mathematical economics , path (computing) , sequential equilibrium , pareto principle , economic equilibrium , markov perfect equilibrium , general equilibrium theory , rational expectations , equilibrium selection , microeconomics , nash equilibrium , computer science , econometrics , repeated game , game theory , macroeconomics , operations management , programming language

We examine the rational expectations equilibrium paths of the model of search and barter in Diamond's "Aggregate Demand Management in Search Equilibrium." For some initial positions, there are two equilibrium paths converging to different steady states, with the high-activity path Pareto-dominating the low-activity path. With some parameters there is also a continuum of equilibrium paths converging to another steady state. Moreover, there can be cycles that are equilibrium paths, even though the environment is stationary.

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