Informational diversity over time and the optimality of monetary equilibria |
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Authors: | Dan Peled |
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Affiliation: | Graduate School of Industrial Administration, Carnegie-Mellon University, Pittsburgh, Pennsylvania 15213 USA |
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Abstract: | The temporal realizations of a random state variable in an overlapping generations model create an informational diversity between members of different generations and require a reexamination of the optimality that competitive equilibria might display in such an environment. Using an optimality criterion that reflects this informational diversity we prove the optimality of competitive equilibrium in a model with a fixed stock of fiat money, a single-spot market, and good endowments that follow a Markov process. The need for an optimality criterion that incorporates informational diversity is further motivated by studying the same model with the operation of complete contingent commodities markets. |
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