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A Proof of the Existence of Speculative Equilibria

  • Jackson Matthew O.

The existence of speculative equilibria is proven in a simple overlapping generations, infinite horizon economy. In equilibrium, all agents bid assets according to increasing functions of private information which is uncorrelated with the fundamental value (dividend stream) of the asset. This is a unique best response to the strategies of the other agents, which implies that speculative information is valuable.

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File URL: http://www.sciencedirect.com/science/article/B6WJ3-45P0KHW-10/2/e9253cf042e446c24f0dbf7679a3360f
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 64 (1994)
Issue (Month): 1 (October)
Pages: 221-233

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Handle: RePEc:eee:jetheo:v:64:y:1994:i:1:p:221-233
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Jackson, Matthew & Peck, James, 1991. "Speculation and price fluctuations with private, extrinsic signals," Journal of Economic Theory, Elsevier, vol. 55(2), pages 274-295, December.
  2. Peck, James, 1988. "On the existence of sunspot equilibria in an overlapping generations model," Journal of Economic Theory, Elsevier, vol. 44(1), pages 19-42, February.
  3. Forges, F., 1991. "Correlated equilibrium and sunspot equilibrium," CORE Discussion Papers 1991053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  5. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  6. Peck, James & Shell, Karl, 1991. "Market Uncertainty: Correlated and Sunspot Equilibria in Imperfectly Competitive Economies," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 1011-29, October.
  7. Spear, Stephen E, 1989. "Are Sunspots Necessary?," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 965-73, August.
  8. James Peck & Karl Shell, 2003. "Equilibrium Bank Runs," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 103-123, February.
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