Department of Economics
New York University


The Churchill Lectures in Economic Theory

Strategic Foundations of General Equilibrium:
Dynamic Matching and Bargaining Games

Published by Cambridge University Press (2000)

Chapter 0. Markets and Games (.pdf format)

This chapter introduces the lectures. It contains a discussion of

  • why we need strategic foundations for competitive equilibrium;
  • the history of strategic models of competition, from Cournot and Edgeworth to the present day;
  • the Rubinstein-Stahl bargaining model;
  • the Rubinstein-Wolinsky model and extensions by myself and others;
  • some unanswered questions;
and concludes with an overview of the rest of the book.

Chapter 1. Perfect Competition (.pdf format)

Most of the earlier literature assumed a continuum of agents, thus finessing a number of troublesome strategic issues. This chapter reconstructs the theory, beginning with a finite number of agents and then proving a competitive limit theorem as the number of agents converges to infinity.

Chapter 2. Continuity (.pdf format)

In order to carry through the analysis in Chapter 1, it is necessary to make use of some restrictive assumptions: the analysis is restricted to Markov perfect equilibria, and additional continuity and anonymity assumptions are imposed on the equilibrium strategies. Building on the work of Wolinsky and Rubinstein, Green, and Sabourian, Chapter 2 rationalizes these restrictions as properties of robust equilibria when agents have imperfect memory.

Chapter 3. Bounded Rationality (.pdf format)

The theme of bounded rationality begun in Chapter 2 is continued in this chapter, where a model of simple adaptive behavior is shown to converge to perfectly competitive equilibrium behavior.

Chapter 4. Afterthoughts (.pdf format)

The final chapter relates the work on dynamic matching and bargaining games to the coordination problem in economics and argues that the theory of competitive equilibrium has yet to take seriously the distinction between partial and general equilibrium.

Bibliography (.pdf format)