COWLES FOUNDATION FOR RESEARCH IN
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COWLES FOUNDATION DISCUSSION PAPER NO. 1261 Information and the Existence of Stationary Markovian Equilibrium Ioannis Karatzas, Martin Shubik, William D. Sudderth June 2000 We describe conditions for the existence of a stationary Markovian equilibrium when total production or total endowment is a random variable. Apart from regularity assumptions, there are two crucial conditions: (i) low information -- agents are ignorant of both total endowment and their own endowments when they make decisions in a given period, and (ii) proportional endowments -- the endowment of each agent is in proportion, possibly a random proportion, to the total endowment. When these conditions hold, there is a stationary equilibrium. When they do not hold, such equilibrium need not exist. Keywords: Information, stochastic process, money, and disequilibrium JEL Classification: C72, C73, D80 |
