Equilibrium coordination with discretionary policy making

Dennis, R. and Kirsanova, T. (2018) Equilibrium coordination with discretionary policy making. Economic Journal, 128(609), pp. 710-727. (doi:10.1111/ecoj.12407)

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Abstract

Discretionary policymakers cannot manage private-sector expectations and cannot coor- dinate the actions of future policymakers. As a consequence, coordination failures can occur and multiple equilibria can arise. In this paper we employ notions of self-enforceability and learnability to motivate and identify equilibria of particular interest in discretionary policy problems exhibiting multiple equilibria. Central among these criteria are whether an equilib- rium is robust to the formation of coalitions, and whether it is learnable by private agents and jointly learnable by private agents and the policymaker. Unless the Pareto-preferred equilibrium is learnable by private agents we find little reason to expect coordination on that equilibrium.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Kirsanova, Professor Tatiana and Dennis, Professor Richard
Authors: Dennis, R., and Kirsanova, T.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Economic Journal
Publisher:Wiley
ISSN:0013-0133
ISSN (Online):1468-0297
Published Online:12 April 2017
Copyright Holders:Copyright © 2016 Royal Economic Society
First Published:First published in Economic Journal 128(609):710-727
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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