Dynamic efficiency in overlapping generations models with stochastic production

Research output: Contribution to journalArticlepeer-review


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).

Original languageEnglish
Pages (from-to)364-379
Number of pages16
JournalJournal of Economic Theory
Issue number2
StatePublished - Dec 1990


Dive into the research topics of 'Dynamic efficiency in overlapping generations models with stochastic production'. Together they form a unique fingerprint.

Cite this