Intertemporal coordination in two-period markets

Ghosal, S. (2006) Intertemporal coordination in two-period markets. Journal of Mathematical Economics, 43(1), pp. 11-35. (doi:10.1016/j.jmateco.2006.07.003)

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Abstract

This paper studies the stability of the intertemporal coordination dynamics when the common knowledge of individual expectations of future prices is perturbed in a neighborhood of a perfect foresight equilibrium. The main forces that affect stability are: (i) the effect of a change in asset demand on second period spot market prices, and (ii) the effect on asset demand of a small change in second period prices. In an intertemporal market game whose interior Markov perfect equilibria correspond to perfect foresight equilibria, it is shown that though M-rationalizability implies the stability of the intertemporal dynamics, the converse is not always true.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Ghosal, Professor Sayantan
Authors: Ghosal, S.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Mathematical Economics
ISSN:0304-4068
ISSN (Online):1873-1538
Published Online:08 September 2006

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