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Market Uncertainty: Correlated and Sunspot Equilibria in Imperfectly Competitive Economies

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Author Info
Peck, James
Shell, Karl

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Abstract

An imperfectly competitive economy is very prone to market uncertainty, including uncertainty about the liquidity (or "thickness") of markets. The authors show, in particular, that there exist stochastic equilibrium outcomes in nonstochastic market games if (and only if) the endowments are not Pareto optimal. They also provide a link between extrinsic uncertainty arising in games (e.g., correlated equilibria) and extrinsic uncertainty in market economies (e.g., sunspot equilibria). A correlated equilibria to the market game is either a sunspot equilibrium or a nonsunspot equilibrium to the related securities games, but the converse is not true in general. Copyright 1991 by The Review of Economic Studies Limited.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 58 (1991)
Issue (Month): 5 (October)
Pages: 1011-29
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Handle: RePEc:bla:restud:v:58:y:1991:i:5:p:1011-29

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  1. John Geanakoplos & Pradeep Dubey, 1989. "Existence of Walras Equilibrium Without a Price Player of Generalized Game," Cowles Foundation Discussion Papers 912, Cowles Foundation, Yale University. [Downloadable!]
  2. Matthew O. Jackson & James Peck, 1997. "Asymmetric Information in a Competitive Market Game: Reexamining the Implications of Rational Expectations," Microeconomics 9711004, EconWPA. [Downloadable!]
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  3. Sonia Giannatale, 2008. "Sunspot-like equilibria in an overlapping generations economy with strategic interactions," Economic Theory, Springer, vol. 35(1), pages 191-199, April. [Downloadable!] (restricted)
  4. Gaël GIRAUD & Sonia WEYERS, 2003. "Strategic Market Games with a Finite Horizon and Incomplete," Working Papers of BETA 2003-04, Bureau d'Economie Théorique et Appliquée, ULP, Strasbourg. [Downloadable!]
  5. Pengfei Wang & Yi Wen, 2007. "Incomplete information and self-fulfilling prophecies," Working Papers 2007-033, Federal Reserve Bank of St. Louis. [Downloadable!]
  6. Matthew O. Jackson, 1992. "Proof of the Existence of Speculative Equilibria," Discussion Papers 1003, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  7. John Duffy & Eric O'N. Fisher, 2005. "Sunspots in the Laboratory," American Economic Review, American Economic Association, vol. 95(3), pages 510-529, June. [Downloadable!]
  8. Jordi Galí, 1993. "Monopolistic Competition, Business Cycles, and the Composition of Aggregate Demand," Economics Working Papers 45, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  9. Karl Shell & Randall Wright, 1991. "Indivisibilities, lotteries, and sunspot equilibria," Staff Report 133, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  10. Huberto Ennis & Todd Keister, 2001. "Optimal policy with probabilistic equilibrium selection," Working Paper 01-03, Federal Reserve Bank of Richmond. [Downloadable!]
  11. Francis De Morogues, 1999. "Equilibres moétaires du jeu stratégique de marché dans le modèle à générations imbriquées," Annales d'Economie et de Statistique, ADRES, issue 54, pages 01, Avril-Jui. [Downloadable!]
  12. Huberto M. Ennis & Todd Keister, 2007. "Commitment and equilibrium bank runs," Staff Reports 274, Federal Reserve Bank of New York. [Downloadable!]
  13. Pengfei Wang & Yi Wen, 2006. "Imperfect competition and sunspots," Working Papers 2006-015, Federal Reserve Bank of St. Louis. [Downloadable!]
  14. Gaël Giraud & Dimitrios Tsomocos, 2004. "Global uniqueness and money non-neutrality in a Walrasian dynamics without rational expectations," Cahiers de la Maison des Sciences Economiques b04121, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
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  15. Matthew O. Jackson & James Peck, 1993. "Costly Information Acquisition," Discussion Papers 1087, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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