Information and the Existence of Stationary Markovian Equilibrium

Abstract

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 random, to the total endowment. When these conditions hold, there is a stationary equilibrium. When they do not hold, such an equilibrium need not exist.KeywordsUtility FunctionBellman EquationWealth DistributionConsumption FunctionDynamic Programming ProblemThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.