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The set of sunspot equilibria in economies with incomplete financial markets: variable asset prices

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  • Tito Pietra

    () (S.E.T. and Università di Modena e Reggio Emilia, Dipartimento di Economia Politica, V. le Berengario 51, 41100 Modena, ITALY)

Abstract

I consider the set of equilibria of two-period economies with S extrinsic states of nature in the second period and I assets with linearly independent nominal payoffs. Asset prices are variable. If the number of agents is greater than (S-I), the payoff matrix is in general position and S $\ge$ 2I, the set of equilibrium allocations generically (in utility function space) contains a smooth manifold of dimension (S-1). Moreover, the map from states o f nature to equilibrium allocations (restricted to this manifold) is one-to-one at each equilibrium.

Suggested Citation

  • Tito Pietra, 2001. "The set of sunspot equilibria in economies with incomplete financial markets: variable asset prices," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 18(3), pages 649-659.
  • Handle: RePEc:spr:joecth:v:18:y:2001:i:3:p:649-659
    Note: Received: February 23, 1998; revised version: June 1, 2000
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    Cited by:

    1. Alessandro, CITANNA & SCHMEDDERS, Karl, 2002. "Controlling price volatility through financial innovation," Les Cahiers de Recherche 749, HEC Paris.
    2. M. Salto & T. Pietra, 2013. "Welfare and excess volatility of exchange rates," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(2), pages 501-529, March.

    More about this item

    Keywords

    Sunspot equilibria.;

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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