Publication: Cheating for the common good in a macroeconomic policy game
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2001
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Instituto Complutense de Análisis Económico. Universidad Complutense de Madrid
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Abstract
Se presenta un juego repetido que modeliza la interacción entre un gobierno optimizador y el sector privado, representado por un continuo de agentes heterogéneos y atomísticos.
Abstract: This paper presents a simple repeated-game model of interaction
between an optimizing government and the private sector. Two polar cases are
considered: (a) the private sector is represented by a single agent; and (b) there
is a continuum of heterogenous atomistic private agents. In both cases, the government
starts each repetition by making a non-binding announcement about its future actions. The players have complete and perfect information, with one exception: the private agents do not know whether or not the government will act as announced. Thus, each private agent i either behaves with probability πi as if it trusted the announcement, or plays with probability 1 − πi as a Stackelberg leader. After observing the reaction of the private sector, the government
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JEL classification: C69, C79, E5
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