Coarse Competitive Equilibrium and Extreme Prices

• 成果类型: Article
• 署名作者: Gul, Faruk; Pesendorfer, Wolfgang; Strzalecki, Tomasz
• 署名单位: Princeton University; Harvard University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20141287
• 发表日期: 2017
• 页码: 109-137
• 关键词: repeated prisoners-dilemma; Finite automata; EQUITY-PREMIUM; consumption; MARKETS; INFORMATION; memory; puzzle; games

摘要

We introduce a notion of coarse competitive equilibrium, to study agents' inability to tailor their consumption to prices. Our goal is to incorporate limited cognitive ability (in particular limited attention, memory, and complexity) into the analysis of competitive equilibrium. Compared to standard competitive equilibrium, our concept yields more extreme prices and, when all agents have the same endowment, riskier allocations. We provide a tractable model suitable for general equilibrium analysis as well as asset pricing.