Questions tagged [equilibrium-selection]

The equilibrium selection tag applies to question which deal with the issue of selecting one or more out of multiple equilibria based on some criterion.

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3 votes
1 answer

Sequential Equilibrium (SE) and Perfect Bayesian Equilibrium (PBE) in signaling games

I know that in the paper "Perfect Bayesian equilibrium and sequential equilibrium", the authors proved that for signaling games (considering the simple case that there are two periods and ...
1 vote
0 answers

Why Sequenial Equilibrium (SE) imposes no restrictions on the off-equilibrium beliefs in the Spence's model?

I read some lectures on the Spence's model. Some (see e.g. P31 of lecture PPT from MIT game thoery course) mention that SE imposes no restrictions on the off-equilibrium beliefs but without proof. I ...
0 votes
1 answer

Refinements in signaling games with three sender types

What are the pros and cons of the Intuitive Criterion and the Criterion of Divinity in signaling games with three types? I find that separating equilibria often survive the intuitive criterion, ...
-2 votes
1 answer

Equation: If the equilibrium level of GDP is $21,500, what is the marginal propensity to consume?

Equations for $C$, $I$, $G$, and $NX$ are given below. If the equilibrium level of $GDP$ is $\$21,500$, what is the marginal propensity to consume? $$C = 1,500 + (MPC)\cdot Y$$ $$I = 1,000$$ $$G = 2,...
5 votes
1 answer

Divinity for Dummies

I understood the general idea of divinity: that it helps to rule out "unreasonable" equilibria. However, can someone explain it in more details with simple examples so that a senior undergrad student ...
4 votes
1 answer

What is time inconsistency in monetary policy?

I am reading through a bit of policy literature and see authors referring often to the problem of time inconsistency when setting monetary policy. Can anyone explain what is time inconsistency? An ...
5 votes
1 answer

How does Brouwer's fixed point theorem relate to Walrasian equilibrium?

I am trying to understand Walrasian equilibrium and its connection to fixed points, especially how we can apply Brouwer’s fixed point theorem to the notion of Walrasian equilibrium. I understand the ...
2 votes
1 answer

Refinements of Walrasian equilibrium

In Walrasian equilibrium there is a market clearing price, that is $$ D(p) = S(p) $$ or the supply is worthless, so you can have $$ D(p) < S(p) \mbox{ if } p = 0. $$ This can be summarized as $$ p \...