Inequity Aversion, Financial Markets, and Output Fluctuations

Georg Gebhardt
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Georg Gebhardt: University of Munich and University of Chicago,

Journal of the European Economic Association, 2004, vol. 2, issue 2-3, 229-239

Abstract: Drawing on recent advances in the study of reference dependent utility we model financial markets as a coordination game with multiple equilibria. Asset valuations may change endogenously through re-coordination which induces fluctuations in output. These fluctuations are shown to be quantitatively relevant and inefficient. (JEL: G12) Copyright (c) 2004 The European Economic Association.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:229-239

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