English, Article, Journal or magazine article edition: Optimal policy with probabilistic equilibrium selection Huberto Ennis; Todd Keister

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Bookmark: http://trove.nla.gov.au/version/74760
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Optimal policy with probabilistic equilibrium selection
Author
  • Huberto Ennis
  • Todd Keister
Physical Description
  • preprint
Notes
  • This paper introduces an approach to the study of optimal government policy in economies characterized by a coordination problem and multiple equilibria. Such models are often criticized as not being useful for policy analysis because they fail to assign a unique prediction to each possible policy choice. We employ a selection mechanism that assigns, ex ante, a probability to each equilibrium indicating how likely it is to obtain. With this, the optimal policy is well defined. We show how such a mechanism can be derived as the natural result of an adaptive learning process. This approach generates a theory of how government policy affects the process of equilibrium selection; we illustrate this theory by applying it to problems related to the choice of technology and the optimal sales tax on Internet commerce.
  • Public policy ; Electronic commerce ; Equilibrium (Economics)
  • RePEc:fip:fedrwp:01-03
Language
  • English
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