Do sunspots matter when agents are Choquet-expected-utility maximizers?
We consider a two-period, complete market economy in which agents' preferences are represented by a non-additive expected utility. If agents are optimistic i.e. if the measure according to which they compute their expected utility is subadditive, sunspots matter at equilibrium. If agents are pessimistic i.e. if their measure is convex, and share the same beliefs, sunspots do not matter at equilibrium, and the (normalized) equilibrium price is indeterminate. In this latter case, one can even allow for different beliefs among agents and still have that sunspots do not matter. The analysis is contrasted with the case of additive beliefs studied by Cass and Shell, Journal of Political Economy 91 (1983), pp. 193–227.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Balasko, Yves, 1983. "Extrinsic uncertainty revisited," Journal of Economic Theory, Elsevier, vol. 31(2), pages 203-210, December.
- Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
- Schmeidler, David, 1989.
"Subjective Probability and Expected Utility without Additivity,"
Econometric Society, vol. 57(3), pages 571-87, May.
- David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
- Michèle D. Cohen, 1995. "Risk-Aversion Concepts in Expected- and Non-Expected-Utility Models," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 20(1), pages 73-91, June.
- Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
- Wakker, Peter, 1990. "Characterizing optimism and pessimism directly through comonotonicity," Journal of Economic Theory, Elsevier, vol. 52(2), pages 453-463, December.
- Shell, Karl & Wright, Randall, 1993.
"Indivisibilities, Lotteries, and Sunspot Equilibria,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 1-17, January.
- Karl Shell & Randall Wright, 1991. "Indivisibilities, lotteries, and sunspot equilibria," Staff Report 133, Federal Reserve Bank of Minneapolis.
- Karl Shell & Randall Wright, 2010. "Indivisibilities, Lotteries and Sunspot Equilibria," Levine's Working Paper Archive 2061, David K. Levine.
- Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March.
- Tallon, J.M., 1995. "Sunspot Equilibria and Non-Additive Expected Utility Maximizers," Papiers d'Economie MathÃ©matique et Applications 95.14, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- DEBREU, Gérard, .
"Economies with a finite set of equilibria,"
CORE Discussion Papers RP
67, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Sarin, Rakesh K & Wakker, Peter, 1992. "A Simple Axiomatization of Nonadditive Expected Utility," Econometrica, Econometric Society, vol. 60(6), pages 1255-72, November.
- Chateauneuf, Alain, 1991. "On the use of capacities in modeling uncertainty aversion and risk aversion," Journal of Mathematical Economics, Elsevier, vol. 20(4), pages 343-369.
- Karni, Edi & Schmeidler, David, 1991. "Utility theory with uncertainty," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 33, pages 1763-1831 Elsevier.
- Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:22:y:1998:i:3:p:357-368. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.