The Pareto domination of irrational expectations over rational expectations
A simple overlapping generations economy, à la Samuelsen, with one consumer in every generation and with one consumption good in every period, and a fixed stock of outside money, is considered. It is shown that a sequence of temporary economic equilibria which emerges when economic agents predict future prices using an ``irrational inelastic expectation function always generates an allocation of consumption across generations which Pareto dominates the corresponding allocation generated by the rational expectation function. Furthermore, it is shown that in spite of systematic prediction errors, the inelastic expectation function generates an allocation which is efficient.
- Existence and stability of rational expectation-equilibria in a simple overlapping generation model
- Rational expectations in the overlapping generations model
- An example of a dominance approach to rational expectations
- Economically rational expectations equilibrium
- Existence of a Pareto-optimal equilibrium in nearly-stationary overlapping-generations economies
- Dynamics of Temporary Equilibria and Expectations
- Efficiency in one sector, discrete-time, infinite-horizon models
- scientific article; zbMATH DE number 3484411 (Why is no real title available?)
- scientific article; zbMATH DE number 3307201 (Why is no real title available?)
- On Endogenous Competitive Business Cycles
- Regularity in overlapping generations exchange economies
- Stability in a simple pure consumption loan model
- The overlapping-generations model. I: The case of pure exchange without money
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