Staff Report 258

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Original Version: Sequential Equilibria in a Ramsey Tax Model

Christopher Phelan - Consultant
Ennio Stacchetti

Published February 1, 1999

Abstract
This paper presents a full characterization of the equilibrium value set of a Ramsey tax model. More generally, it develops a dynamic programming method for a class of policy games between the government and a continuum of consumers. By selectively incorporating Euler conditions into a strategic dynamic programming framework, we wed two technologies that are usually considered competing alternatives, resulting in a dramatic simplification of the problem.

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