TY - JOUR
T1 - Correlated equilibria and sunspots
AU - Maskin, Eric
AU - Tirole, Jean
N1 - Funding Information:
* We are grateful to Robert Aumann, Karl Shell, and a referee for helpful comments. We thank the National Science Foundation, and the Sloan Foundation for research support.
Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.
PY - 1987/12
Y1 - 1987/12
N2 - We examine when "sunspots" (uncertainty that has no influence on endowments, preferences, or technology) can affect equilibrium in a simple two-period, two-commodity, two-class economy. We find that such an effect is possibly only if the signals (random variables) that different agents observe are imperfectly correlated (neither perfectly correlated nor independent) and at least one commodity is a Giffen good. For two special cases we characterize the set of equilibria due to sunspots. We conclude by showing the intimate connection between the sunspot equilibria of our finite horizon model and those of the overlapping generations literature.
AB - We examine when "sunspots" (uncertainty that has no influence on endowments, preferences, or technology) can affect equilibrium in a simple two-period, two-commodity, two-class economy. We find that such an effect is possibly only if the signals (random variables) that different agents observe are imperfectly correlated (neither perfectly correlated nor independent) and at least one commodity is a Giffen good. For two special cases we characterize the set of equilibria due to sunspots. We conclude by showing the intimate connection between the sunspot equilibria of our finite horizon model and those of the overlapping generations literature.
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U2 - 10.1016/0022-0531(87)90067-6
DO - 10.1016/0022-0531(87)90067-6
M3 - Article
AN - SCOPUS:38249035700
SN - 0022-0531
VL - 43
SP - 364
EP - 373
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 2
ER -