Equilibrium Prices When the Sunspot Variable is Continuous

Posted: 16 Feb 2013

See all articles by Rod Garratt

Rod Garratt

University of California, Santa Barbara (UCSB) - Department of Economics

Todd Keister

Rutgers, The State University of New Jersey - Department of Economics

Cheng-Zhong Qin

University of California, Santa Barbara (UCSB) - Department of Economics

Karl Shell

Cornell University - Department of Economics

Date Written: December 12, 1999

Abstract

We analyze sunspot-equilibrium prices in nonconvex economies with perfect markets and a continuous sunspot variable. Our primary result is that every sunspot equilibrium allocation can be supported by prices that, when adjusted for probabilities, are constant across states. This result extends to the case of a finite number of equally-probable states under a nonsatiation condition, but does not extend to general discrete state spaces. We use our primary result to establish the equivalence of the set of sunspot equilibrium allocations based on a continuous sunspot variable and the set of lottery equilibrium allocations.

Keywords: indivisibilities, nonconvexities, sunspot equilibrium, lottery equilibrium

JEL Classification: D51, D84, E32

Suggested Citation

Garratt, Rod and Keister, Todd and Qin, Cheng-Zhong and Shell, Karl, Equilibrium Prices When the Sunspot Variable is Continuous (December 12, 1999). Journal of Economic Theory, Vol. 107, No. 1, 2002. Available at SSRN: https://ssrn.com/abstract=2218604

Rod Garratt

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

Todd Keister (Contact Author)

Rutgers, The State University of New Jersey - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

HOME PAGE: http://econweb.rutgers.edu/tkeister

Cheng-Zhong Qin

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

Karl Shell

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-5277 (Phone)
607-255-8838 (Fax)

HOME PAGE: http://www.karlshell.com

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