Welfare Gains And Losses In Sunspot Equilibria
We study a standard two period exchange economy with one nominal asset. As is well known there is a continuum of sunspot equilibria around each efficient equilibrium. A sunspot equilibrium is inefficient but some household may gain in sunspot equilibria relative to the efficient equilibrium. We show that a household's equilibrium utility level is either locally maximized or locally minimized at the efficient equilibrium, and derive a condition which identifies whether or not a household's utility is locally minimized or maximized.
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Volume (Year): 58 (2007)
Issue (Month): 3 ()
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- Suda, Shinichi & Tallon, Jean-Marc & Villanacci, Antonio, 1992. "Real Indeterminacy of Equilibria in a Sunspot Economy with Inside Money," Economic Theory, Springer, vol. 2(3), pages 309-19, July.
- Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
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