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Dynamic games with hidden actions and hidden states
We consider a class of dynamic games in which each player?s actions are unobservable to the other players and each player?s actions can influence a state variable that is unobservable to the other players. We develop an algorithm that solves for the subset of sequential equilibria in which equilibrium strategies depend on private information only through the privately observed state.
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Household heterogeneity and real exchange rates
Typical incomplete markets models in international economics make two assumptions. First, households are not able to fully insure themselves against country-specific shocks. Second, there is a representative household within each country, so that households are fully insured against idiosyncratic shocks. We assume instead that cross-household risk-sharing is limited within countries, but cross-country risk-sharing is complete. We consider two types of limited risk-sharing: domestically incomplete markets (DI) and private information-Pareto optimal (PIPO) risk-sharing. We show that the models ...