A Proof of the Existence of Speculative Equilibria
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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- Peck, James, 1988.
"On the existence of sunspot equilibria in an overlapping generations model,"
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- Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December. Full references (including those not matched with items on IDEAS)
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