Eductive Stability in Sequential Exchange Economies: An Introduction
10 Pages Posted: 28 Jun 2007
Date Written: 2004
Abstract
This paper provides a survey of results concerning eductive stability of equilibrium in an abstract 2-period exchange economy. Eductive stability is based on the Common Knowledge considerations underlying the work reported in the book Assessing rational expectations: eductive stabiltiy in economics from which this paper is a chapter. Iteratively Expectational stability is a necessary condition of eductive stability : conditions for IE stability as well as for local eductive stability are provided and discussed : these conditions stress a key role for the income effects of savings decisions as well as for their sensitivity to relative prices tomorrow.
Keywords: General Equilibrium, Rational Expectations, Common Knowledge
JEL Classification: G50, C62, D84
Suggested Citation: Suggested Citation