In this paper we study the existence of bubbles for pricing equilibria in a pure Exchange Economy a' la Lucas, with infinitely lived homogeneous agents. The model is analyzed under fairly general assumptions: no restrictions either on the stochastic process governing dividends' distribution or on the utilities (possibly unbounded) are required. We prove that the pricing equilibrium is unique as long as the agents exhibit uniformly bounded relative risk aversion. A generic result of uniqueness is also given regardless of agent's preferences. Several ''pathological'' examples exhibiting equilibrium prices with bubble components are constructed. Finally, the presence of ambiguous bubbles along the theory developed by Santos and Woodford is studied by means of a transversality condition at infinity. The whole discussion sheds more insight on the common belief that bubbles are a marginal phenomenon in such models.
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Kandori, Michihiro, 1988.
"Equivalent Equilibria,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 401-17, August.
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Brock, William A., 1980.
"Asset Prices in a Production Economy,"
Working Papers
275, California Institute of Technology, Division of the Humanities and Social Sciences.
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William A. Brock, 1982.
"Asset Prices in a Production Economy,"
NBER Chapters,
in: The Economics of Information and Uncertainty, pages 1-46
National Bureau of Economic Research, Inc.
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Gilles, Christian & LeRoy, Stephen F, 1992.
"Bubbles and Charges,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 323-39, May.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.