Shaping long-run expectations in problems of coordination |
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Authors: | Fernando Vega-Redondo |
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Institution: | Facultad de Económicas and Instituto Valenciano de Investigaciones Económicas, Universidad de Alicante, 03071 Alicante, Spain |
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Abstract: | When far-sighted agents may adjust their behavior only gradually, the issue of equilibrium selection becomes one of tension between history and expectations. This paper analyzes whether, in this context, a government policy maker may intervene successfully and redirect expectations away from the inertia of undesired history. The possibilities and limitations of such an approach to `expectation management' are studied within a game-theoretic framework which involves both the government and the population. |
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Keywords: | Expectations Coordination Taxes Subsidies |
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