Information and the Existence of Stationary Markovian Equilibrium
We describe conditions for the existence of a stationary Markovian equilibrium when total production or total endowment is a random variable. Apart from regularity assumptions, there are two crucial conditions: (i) low information—agents are ignorant of both total endowment and their own endowments when they make decisions in a given period, and (ii) proportional endowments—the endowment of each agent is in proportion, possibly random, to the total endowment. When these conditions hold, there is a stationary equilibrium. When they do not hold, such an equilibrium need not exist.
An expository note on individual risk without aggregate uncertainty
Abstract In economies where agents bear some risk, the analysis would often be facilitated by the assumption that the risks are i.i.d. and disappear in the aggregate. A formal appeal to the law of large numbers requires the consideration of a sequence of finite economies. In an economy with a continuum of agents there are countable families of sets for which it is impossible for a law of large numbers to be valid. With countably many agents and a finitely additive measure, independence is compatible with the law of large numbers.
F.O.B. Pricing versus uniform delivered pricing: A welfare analysis in a stochastic environment
Abstract Under imperfect information but otherwise competitive assumptions, spatial market equilibria are examined for two pricing structures. Under f.o.b. pricing, buyers face a price that reflects exactly the transportation cost between sellers and themselves. Under uniform delivered pricing (u.d.p.), the seller charges the same price to all buyers, inclusive of delivery. Under both, buyers know only of sellers from whom they received ads, sent randomly by sellers. It is found that u.d.p. equilibria may exist when f.o.b. equilibria do not, but not conversely. Also, f.o.b. equilibria are not always welfare superior to u.d.p. ones. These equilibria are not robust: a new firm often succeeds in penetrating a market using a different pricing structure.