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On Equilibrium For Overlapping Generations Organizations

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  • Edward C. Prescott
  • José-Víctor Ríos-Rull

Abstract

Necessary conditions for equilibrium are that beliefs about the behavior of other agents are rational and individuals maximize. We argue that in stationary OLG environments this implies that any future generation in the same situation as the initial generation must do as well as the initial generation did in that situation. We conclude that the existing equilibrium concepts in the literature do not satisfy this condition. We then propose an alternative equilibrium concept, "organizational equilibrium" that satisfies this condition. We show that equilibrium exists, it is unique, and it improves over autarky without achieving optimality. Moreover, the equilibrium can be readily found by solving a maximization program. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Edward C. Prescott & José-Víctor Ríos-Rull, 2005. "On Equilibrium For Overlapping Generations Organizations ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1065-1080, November.
    • Handle: RePEc:ier:iecrev:v:46:y:2005:i:4:p:1065-1080
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    Cited by:

    1. Marco Bassetto & Zhen Huo & José-Víctor Ríos-Rull, 2018. "Organizational Equilibrium with Capital," Working Paper Series WP-2018-20, Federal Reserve Bank of Chicago.
    2. Romp, Ward & Beetsma, Roel, 2020. "Sustainability of pension systems with voluntary participation," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 125-140.
    3. Roel Beetsma & Ward Romp, 2013. "Participation Constraints in Pension Systems," Tinbergen Institute Discussion Papers 13-149/VI, Tinbergen Institute.

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