Comparing Equilibria.

Abstract

The authors develop an ordinal approach to comparing the equilibria of economic models. Its main advantages over the traditional approach based on signing derivatives are that it utilizes only a subset of the assumptions, resulting in a simpler theory that facilitates focusing attention on the economics rather than the mathematics; it applies to discrete changes, even when there are multiple equilibria and when some equilibria do not vary smoothly with the parameters; and 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. Copyright 1994 by American Economic Association.