Intertemporal coordination in a two period economy
|Speaker:||Sayatan Ghosal, University of Warwick|
|Date:||Friday 21 November 2003|
|Location:||Room 106 Streatam Court|
This paper studies the stability of the intertemporal coordination dynamics that arise 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, (ii) the effect on asset demand of a small change in second period prices. In a class of non-atomic, anonymous, sequential games, it is shown that while the stability of the intemporal coordination dynamics is always implied by local extensive-form rationalizability, the converse does not always hold.