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

Thorsten Hens (), János Mayer and Beate Pilgrim
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Thorsten Hens: University of Zurich
János Mayer: University of Zurich
Beate Pilgrim: Reuters AG

A chapter in Essays in Dynamic General Equilibrium Theory, 2005, pp 75-106 from Springer

Abstract: Summary 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: Marginal Utility; Multiple Equilibrium; Competitive Equilibrium; Utility Level; Spot Market (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/3-540-27192-9_4

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