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- Title
Note on the non-existence of sunspot equilibrium.
- Authors
Momi, Takeshi
- Abstract
In this note, we emphasize the role of consumers’ risk aversion in the non-existence of sunspot equilibria in incomplete market economies. We prove that there are no sunspot equilibria if the fundamentals of the underlying economy admit a unique equilibrium for any distribution of endowments. This substantiates Mas-Colell’s (Economic analysis of markets and games: essays in honor of Frank Hahn. MIT, Cambridge, 1992) conjecture. We also prove that, in a two-consumer economy, no sunspot equilibrium exists under the more relaxed condition that the underlying economy admits a unique equilibrium for the initial endowment. This is a generalization of Corollaries 1 and 2 of Hens and Pilgrim (Econ Theory 24:583–602, 2004).
- Subjects
ECONOMIC equilibrium; RESOURCE allocation; CAPITALISM; CONSUMERS; RISK aversion; ENDOWMENTS
- Publication
Economic Theory, 2008, Vol 36, Issue 3, p503
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-007-0255-2