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Introduction to Sunspots and Lotteries

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  • Prescott, Edward

    (U of Minnesota and Federal Reserve Bank of Minneapolis)

  • Shell, Karl

    (Cornell U)

Abstract

This introduces the symposium on sunspots and lotteries. Two stochastic general equilibrium concepts, Sunspot Equilibrium (SE) and Lottery Equilibrium (LE), are compared. It is shown that, for some general, pure-exchange economies which allow for consumption non-convexities or moral hazards, the set of LE allocations is equivalent to the set of SE allocations provided that the randomizing device can generate events of any probability.

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File URL: http://www.arts.cornell.edu/econ/CAE/psjetintro200208241.pdf
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Bibliographic Info

Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 02-08.

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Date of creation: Aug 2002
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Handle: RePEc:ecl:corcae:02-08

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References

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  1. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  2. Fumio Hayashi & Edward C. Prescott, 2000. "The 1990s in Japan: a lost decade," Working Papers 607, Federal Reserve Bank of Minneapolis.
  3. Mas-Colell, Andreu, 1975. "A model of equilibrium with differentiated commodities," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 263-295.
  4. Harold L. Cole & Lee E. Ohanian, 2001. "The great U.K. depression: a puzzle and possible resolution," Staff Report 295, Federal Reserve Bank of Minneapolis.
  5. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  6. Gaetano Antinolfi & Todd Keister, 1998. "Options and sunspots in a simple monetary economy," Economic Theory, Springer, vol. 11(2), pages 295-315.
  7. Garratt, Rod & Keister, Todd, 2002. "A Characterization of Robust Sunspot Equilibria," Journal of Economic Theory, Elsevier, vol. 107(1), pages 136-144, November.
  8. Manuelli, Rodolfo & Peck, James, 1992. "Sunspot-like effects of random endowments," Journal of Economic Dynamics and Control, Elsevier, vol. 16(2), pages 193-206, April.
  9. Garratt, Rod & Keister, Todd & Qin, Cheng-Zhong & Shell, Karl, 2002. "Equilibrium Prices When the Sunspot Variable Is Continuous," Journal of Economic Theory, Elsevier, vol. 107(1), pages 11-38, November.
  10. Fumio Hayashi & Edward C. Prescott, 2002. "Data Appendix to The 1990s in Japan: A Lost Decade," Technical Appendices hayashi02, Review of Economic Dynamics.
  11. Karl Shell & Randall Wright, 1991. "Indivisibilities, lotteries, and sunspot equilibria," Staff Report 133, Federal Reserve Bank of Minneapolis.
  12. Karl Shell & Aditya Goenka, 1997. "Robustness of sunspot equilibria," Economic Theory, Springer, vol. 10(1), pages 79-98.
  13. Timothy J. Kehoe & David K. Levine & Edward Prescott, 2000. "Lotteries, Sunspots and Incentive Constraints," Levine's Working Paper Archive 1974, David K. Levine.
  14. Harald Uhlig, 2010. "A Law of Large Numbers for Large Economies," Levine's Working Paper Archive 2070, David K. Levine.
  15. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-11, Sept.-Oct.
  16. Prescott, Edward C & Townsend, Robert M, 1984. "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, Econometric Society, vol. 52(1), pages 21-45, January.
  17. Terry J. Fitzgerald, 1996. "Work schedules, wages, and employment in a general equilibrium model with team production," Working Paper 9613, Federal Reserve Bank of Cleveland.
  18. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
  19. Kydland, Finn E & Prescott, Edward C, 1991. "Hours and Employment Variation in Business Cycle Theory," Economic Theory, Springer, vol. 1(1), pages 63-81, January.
  20. Victoria Osuna Padilla & José-Víctor Ríos-Rull, 2002. "Implementing the 35 Hour Workweek by Means of Overtime Taxation," Economic Working Papers at Centro de Estudios Andaluces E2002/04, Centro de Estudios Andaluces.
  21. Rod Garratt & Todd Keister & Karl Shell, 2004. "Comparing Sunspot Equilibrium And Lottery Equilibrium Allocations: The Finite Case," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 351-386, 05.
  22. Balasko, Yves, 1983. "Extrinsic uncertainty revisited," Journal of Economic Theory, Elsevier, vol. 31(2), pages 203-210, December.
  23. Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
  24. Gary D. Hansen & Thomas J. Sargent, 1987. "Straight Time and Overtime in Equilibrium," UCLA Economics Working Papers 455, UCLA Department of Economics.
  25. Rod Garratt, 2010. "Decentralizing Lottery Allocations in Markets With Indivisible Commodities," Levine's Working Paper Archive 2087, David K. Levine.
  26. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  27. Cole, Harold Linh, 1989. "General Competitive Analysis in an Economy with Private Information: Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 249-52, February.
  28. Harold L. Cole & Lee E. Ohanian, 2002. "Data Appendix to The Great U.K. Depression: A Puzzle and Possible Resolution," Technical Appendices cole02, Review of Economic Dynamics.
  29. Prescott, Edward C & Townsend, Robert M, 1984. "General Competitive Analysis in an Economy with Private Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 1-20, February.
  30. Andreas Hornstein & Edward C. Prescott, 1989. "The firm and the plant in general equilibrium theory," Staff Report 126, Federal Reserve Bank of Minneapolis.
  31. Spear, Stephen E. & null, 2, 2001. "An Interview With Karl Shell," Macroeconomic Dynamics, Cambridge University Press, vol. 5(05), pages 701-741, November.
  32. Jones, Larry E, 1984. "A Competitive Model of Commodity Differentiation," Econometrica, Econometric Society, vol. 52(2), pages 507-30, March.
  33. Edward S. Prescott, 1999. "A primer on moral-hazard models," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 47-78.
  34. Elizabeth M. Caucutt, 2001. "Peer group effects in applied general equilibrium," Economic Theory, Springer, vol. 17(1), pages 25-51.
  35. Prescott, Edward Simpson & Townsend, Robert M., 2002. "Collective Organizations versus Relative Performance Contracts: Inequality, Risk Sharing, and Moral Hazard," Journal of Economic Theory, Elsevier, vol. 103(2), pages 282-310, April.
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Cited by:
  1. Masahiko Aoki, 2006. "Mechanisms of Endogenous Institutional Change," Discussion Papers 05-013, Stanford Institute for Economic Policy Research.
  2. Rocheteau, Guillaume & Rupert, Peter & Shell, Karl & Wright, Randall, 2008. "General equilibrium with nonconvexities and money," Journal of Economic Theory, Elsevier, vol. 142(1), pages 294-317, September.
  3. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.

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