Endogenous strategic business cycles

Aditya Goenka, David L. Kelly, Stephen E. Spear

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Abstract

This paper examines an overlapping generations version of the Shapley-Shubik market game. We show existence of equilibria for the simple one commodity model and analyze the dynamics of the equilibrium trajectories generated in the model. Because of the non-linearities generated by strategic interaction of agents in the model, we find that complex and chaotic equilibrium dynamics are possible in this model for a much broader range of preferences than those for which Grandmont (Econometrica 53, No. 5 (1995), 995-1045) found complicated dynamics in the perfectly competitive version of this model. These results, then, provide an alternative to the usual technology-based explanation for the historical fact that business cycles became an important economic phenomenon only with the onset of industrialization. Journal of Economic Literature Classification Numbers: C72, C73, D51, L16.

Original languageEnglish (US)
Pages (from-to)97-125
Number of pages29
JournalJournal of Economic Theory
Volume81
Issue number1
DOIs
StatePublished - Jul 1998

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ASJC Scopus subject areas

  • Economics and Econometrics

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