On the stability of nonsunspot equilibria

Yves Balasko

Journal of Economic Theory, 2012, vol. 147, issue 2, 526-544

Abstract: This paper analyzes the stability of the (Pareto efficient) nonsunspot equilibria as a function of the constraints faced by consumers in their ability to transfer wealth between states of nature. Equilibria that are stable for the certainty economy define nonsunspot equilibria that are stable in the following two polar cases: 1) All consumers are unconstrained; 2) All consumers are fully constrained. Furthermore, the stable certainty equilibria with small trade vectors define nonsunspot equilibria that are also stable independently of the constraint levels. Instability can develop only at intermediate constraint levels and for nonsunspot equilibria that feature sufficiently large trade vectors.

Keywords: Sunspot equilibria; Stability; Bifurcation; Market participation (search for similar items in EconPapers)
JEL-codes: C61 C62 D43 D51 D52 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:2:p:526-544

DOI: 10.1016/j.jet.2010.09.002

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