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On the stability of nonsunspot equilibria

Listed author(s):
  • Balasko, Yves
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    This paper analyzes the stability of the (Pareto efficient) nonsunspot equilibria as a function of the constraints faced by consumers in their ability to transfer wealth between states of nature. Equilibria that are stable for the certainty economy define nonsunspot equilibria that are stable in the following two polar cases: 1) All consumers are unconstrained; 2) All consumers are fully constrained. Furthermore, the stable certainty equilibria with small trade vectors define nonsunspot equilibria that are also stable independently of the constraint levels. Instability can develop only at intermediate constraint levels and for nonsunspot equilibria that feature sufficiently large trade vectors.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053110001274
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    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 147 (2012)
    Issue (Month): 2 ()
    Pages: 526-544

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    Handle: RePEc:eee:jetheo:v:147:y:2012:i:2:p:526-544
    DOI: 10.1016/j.jet.2010.09.002
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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    1. Balasko, Yves, 1983. "Extrinsic uncertainty revisited," Journal of Economic Theory, Elsevier, vol. 31(2), pages 203-210, December.
    2. Yves Balasko & David Cass & Karl Shell, 1995. "Market Participation and Sunspot Equilibria," Review of Economic Studies, Oxford University Press, vol. 62(3), pages 491-512.
    3. Yves Balasko, 2007. "Out-of-equilibrium price dynamics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(3), pages 413-435, December.
    4. M. I. Finley, 1958. "Note," Economic History Review, Economic History Society, vol. 11(1), pages 97-97, August.
    5. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
    6. Prechac, Christophe, 1996. "On Regular Symmetric Economies," Journal of Economic Theory, Elsevier, vol. 69(1), pages 198-204, April.
    7. Balasko, Yves, 1975. "Some results on uniqueness and on stability of equilibrium in general equilibrium theory," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 95-118.
    8. Yves Balasko, 2009. "The Equilibrium Manifold: Postmodern Developments in the Theory of General Economic Equilibrium," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026546, January.
    9. Spear, Stephen E., 1984. "Sufficient conditions for the existence of sunspot equilibria," Journal of Economic Theory, Elsevier, vol. 34(2), pages 360-370, December.
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