Existence of Sunspot Equilibria and Uniqueness of Spot Market Equilibria: The Case of Intrinsically Complete Markets

Thorsten Hens, Beate Pilgrim and Janos Mayer

No 188, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: We consider economies with additively separable utility functions and give conditions for the two-agents case under which the existence of sunspot equilibria is equivalent to the occurrence of the transfer paradox. This equivalence enables us to show that sunspots cannot matter if the initial economy has a unique spot market equilibrium and there are only two commodities or if the economy has a unique equilibrium for all distributions of endowments induced by asset trade. For more than two agents the equivalence breaks and we give an example for sunspot equilibria even though the economy has a unique equilibrium for all distributions of endowments induced by asset trade.

Keywords: Sunspot Equilibria; Transfer Paradox (search for similar items in EconPapers)
JEL-codes: C62 D52 F20 F3 O12 (search for similar items in EconPapers)
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Citations: View citations in EconPapers (6)

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