ENDOGENOUS STRATEGIC BUSINESS CYCLES

This paper examines an overlapping generations version of the Shapley- Shubik market game. We show existence of equilibria for the simple one commodity model and analyze the dynamics of the equilibrium trajector ies generated in the model. Because of the non-linearities generated b y strategic interaction of agents in the model, we find that complex a nd chaotic equilibrium dynamics are possible in this model for a much broader range of preferences than those for which Grandmont (Econometr ica 53, No. 5 (1995), 995-1045) found complicated dynamics in the perf ectly competitive version of this model. These results, then, provide an alternative to the usual technology-based explanation for the histo rical fact that business cycles became an important economic phenomeno n only with the onset of industrialization. (C) 1998 Academic Press.