TY - JOUR
T1 - Dynamic efficiency in overlapping generations models with stochastic production
AU - Zilcha, Itzhak
N1 - Funding Information:
* I thank Andy Abel, Rao Aiyagari, Mukul Majumdar, Dan Peled, Bezalel Peleg, Roy Radner, Karl Shell, and Nancy Stokey for helpful discussions and remarks. Financial assistance from the Foerder Institute for Economic Research at Tel Aviv University and the Warshow Endowment at Cornell University is gratefully acknowledged.
PY - 1990/12
Y1 - 1990/12
N2 - We consider an overlapping generations economy, as in Diamond (Amer. Econ. Rev. 55 (1965), 1126-1150), with stochastic production. We define two types of efficiency for feasible production-consumption allocations, using first and second degree stochastic dominance. We obtain a complete characterization of inefficiency (of type I) in this model. For each given sequence of strictly concave utility functions (for all generations) the existence of a competitive equilibrium is proved. It is shown that each competitive allocation is short-run efficient (of type II).
AB - We consider an overlapping generations economy, as in Diamond (Amer. Econ. Rev. 55 (1965), 1126-1150), with stochastic production. We define two types of efficiency for feasible production-consumption allocations, using first and second degree stochastic dominance. We obtain a complete characterization of inefficiency (of type I) in this model. For each given sequence of strictly concave utility functions (for all generations) the existence of a competitive equilibrium is proved. It is shown that each competitive allocation is short-run efficient (of type II).
UR - http://www.scopus.com/inward/record.url?scp=0000417253&partnerID=8YFLogxK
U2 - 10.1016/0022-0531(90)90037-K
DO - 10.1016/0022-0531(90)90037-K
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AN - SCOPUS:0000417253
SN - 0022-0531
VL - 52
SP - 364
EP - 379
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 2
ER -