### Abstract

Some recent equilibrium models give rise to complex but deterministic fluctuations. We modify the hypothesis of universal perfect foresight by injecting into the economy a nonnegligible fraction of less informed agents who optimize their expected utility with respect to the statistical distribution of prices in the deterministic dynamics. For the standard overlapping generations model with money (the 'Samuelson' case) it is proved that if the fraction of consumers with limited knowledge is sufficiently high, then all equilibrium cycles of period k ≥ 2 disappear. The global properties of the case of 2-cycles are studied in detail. A brief analysis of the 'classical' case is also given.

Original language | English (US) |
---|---|

Pages (from-to) | 705-721 |

Number of pages | 17 |

Journal | Journal of Economic Dynamics and Control |

Volume | 17 |

Issue number | 5-6 |

DOIs | |

State | Published - 1993 |

### Fingerprint

### ASJC Scopus subject areas

- Economics and Econometrics
- Control and Optimization

### Cite this

*Journal of Economic Dynamics and Control*,

*17*(5-6), 705-721. https://doi.org/10.1016/0165-1889(93)90011-G

**On the preservation of deterministic cycles when some agents perceive them to be random fluctuations.** / Evans, George W.; Honkapohja, Seppo; Sargent, Thomas.

Research output: Contribution to journal › Article

*Journal of Economic Dynamics and Control*, vol. 17, no. 5-6, pp. 705-721. https://doi.org/10.1016/0165-1889(93)90011-G

}

TY - JOUR

T1 - On the preservation of deterministic cycles when some agents perceive them to be random fluctuations

AU - Evans, George W.

AU - Honkapohja, Seppo

AU - Sargent, Thomas

PY - 1993

Y1 - 1993

N2 - Some recent equilibrium models give rise to complex but deterministic fluctuations. We modify the hypothesis of universal perfect foresight by injecting into the economy a nonnegligible fraction of less informed agents who optimize their expected utility with respect to the statistical distribution of prices in the deterministic dynamics. For the standard overlapping generations model with money (the 'Samuelson' case) it is proved that if the fraction of consumers with limited knowledge is sufficiently high, then all equilibrium cycles of period k ≥ 2 disappear. The global properties of the case of 2-cycles are studied in detail. A brief analysis of the 'classical' case is also given.

AB - Some recent equilibrium models give rise to complex but deterministic fluctuations. We modify the hypothesis of universal perfect foresight by injecting into the economy a nonnegligible fraction of less informed agents who optimize their expected utility with respect to the statistical distribution of prices in the deterministic dynamics. For the standard overlapping generations model with money (the 'Samuelson' case) it is proved that if the fraction of consumers with limited knowledge is sufficiently high, then all equilibrium cycles of period k ≥ 2 disappear. The global properties of the case of 2-cycles are studied in detail. A brief analysis of the 'classical' case is also given.

UR - http://www.scopus.com/inward/record.url?scp=38248999672&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=38248999672&partnerID=8YFLogxK

U2 - 10.1016/0165-1889(93)90011-G

DO - 10.1016/0165-1889(93)90011-G

M3 - Article

VL - 17

SP - 705

EP - 721

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

IS - 5-6

ER -