The instability of some non-full-support steady states in a random matching model of money
Huang, Pidong; Igarashi, Yoske
Date: 18 September 2014
Journal
Journal of Mathematical Economics
Publisher
Elsevier
Publisher DOI
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Abstract
Zhu (2003) shows existence of full-support monetary steady states with strictly concave value functions in a random matching model with individual money holdings in {0,1,2,…,B} for a general B. He also shows that corresponding to each such steady state is an l-replica steady state for each l∈N: money is traded in bundles of l units, ...
Zhu (2003) shows existence of full-support monetary steady states with strictly concave value functions in a random matching model with individual money holdings in {0,1,2,…,B} for a general B. He also shows that corresponding to each such steady state is an l-replica steady state for each l∈N: money is traded in bundles of l units, the support is {0,l,2l,…,lB}, and the value function is a step-function with jumps at points of the support. We show that such l-replicas are unstable if the underlying full-support steady state is a pure strategy steady state and if the support of the initial distribution is not {0,l,2l,…,lB}.
Economics
Faculty of Environment, Science and Economy
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