Inserted: 14 oct 2017
Last Updated: 2 mar 2019
t is the aim of this work provide a rigorous treatment concerning the formation of spatial rational expectations equlibria in a general class of spatial economic models under the effect of externalities, using techniques from the calculus of variations. Using detailed estimates for a parametric optimisation problem, the existence of spatial rational expectations equilibria is proved and they are characterised in terms of a nonlocal Euler-Lagrange equation.
Keywords: optimal control, general equilibrium, infinite-horizon, pontryagin principle, BV space