Abstract:We propose a refinement process of dynamic equilibria based on small random perturbations (SRPs) of the backward perfect foresight (bpf) equilibrium map in a class of one‐step, forward‐looking dynamic models. An equilibrium is selected if its stationary measure is the limit of the stationary measures associated with the processes generated by the SRPs of the bpf maps, as the perturbation size approaches 0. We show that, for full measure sets of parameter values of a large class of one‐parameter families of uni… Show more
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