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Comparing Equilibria

Paul Milgrom and John Roberts
The American Economic Review
Vol. 84, No. 3 (Jun., 1994), pp. 441-459
Stable URL: http://www.jstor.org/stable/2118061
Page Count: 19
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Comparing Equilibria
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Abstract

We develop an ordinal approach to comparing the equilibria of economic models. Its main advantages over the traditional approach based on signing derivatives are that (i) it utilizes only a subset of the assumptions, resulting in a simpler theory that facilitates focusing attention on the economics rather than the mathematics, (ii) it applies to discrete changes, even when there are multiple equilibria and when some equilibria do not vary smoothly with the parameters, and (iii) it incorporates a formal theory of the robustness of conclusions to assumptions, which helps modelers distinguish which assumptions are "critical" to their comparative-statics conclusions.

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