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Correlated equilibrium and sunspot equilibrium

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  • Forges, F.

Abstract

We show by an example that the sunspot equilibria of a competitive economy are not equivalent to the correlated equilibria if sunspots generate transfers between (extrinsic) state of nature (through a contingent commodities market). Nevertheless, we prove that the sunspot equilibrium allocations of a standard overlapping generations economy coincide with the (strategic form) correlated equilibrium allocations of a natural market game mimicking the economy.
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Suggested Citation

  • Forges, F., 1991. "Correlated equilibrium and sunspot equilibrium," LIDAM Discussion Papers CORE 1991053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1991053
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    Cited by:

    1. Hens, Thorsten & Mayer, Janós & Pilgrim, Beate, 2004. "Existence of Sunspot Equilibria and Uniqueness of Spot Market Equilibria: The Case of Intrinsically Complete Markets," Discussion Papers 2004/15, Norwegian School of Economics, Department of Business and Management Science.
    2. Acharya, Sushant & Benhabib, Jess & Huo, Zhen, 2021. "The anatomy of sentiment-driven fluctuations," Journal of Economic Theory, Elsevier, vol. 195(C).
    3. Giraud, Gael & Rochon, Celine, 2002. "Consistent collusion-proofness and correlation in exchange economies," Journal of Mathematical Economics, Elsevier, vol. 38(4), pages 441-463, December.
    4. Thorsten Hens & Beate Pilgrim, "undated". "Subsidizing Charitable Giving in a Field Experiment," IEW - Working Papers 070, Institute for Empirical Research in Economics - University of Zurich.
    5. Jackson Matthew O., 1994. "A Proof of the Existence of Speculative Equilibria," Journal of Economic Theory, Elsevier, vol. 64(1), pages 221-233, October.
    6. Hart, Sergiu & Mas-Colell, Andreu, 2015. "Markets, correlation, and regret-matching," Games and Economic Behavior, Elsevier, vol. 93(C), pages 42-58.
    7. Thorsten Hens & Beate Pilgrim, 2004. "Sunspot equilibria and the transfer paradox," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(3), pages 583-602, October.
    8. Indrajit Ray & Sonali Gupta, 2013. "Coarse correlated equilibria in linear duopoly games," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(2), pages 541-562, May.
    9. Julio Dávila, "undated". "Reducing Overlapping Generations Economies to Finite Economies," Penn CARESS Working Papers 9819996a2b80f99a81bf1509c, Penn Economics Department.
    10. Ghosal, Sayantan & Morelli, Massimo, 2004. "Retrading in market games," Journal of Economic Theory, Elsevier, vol. 115(1), pages 151-181, March.
    11. Polemarchakis, Herakles M. & Ray, Indrajit, 2006. "Sunspots, correlation and competition," Games and Economic Behavior, Elsevier, vol. 56(1), pages 174-184, July.
    12. Peck, James, 2003. "Large market games with demand uncertainty," Journal of Economic Theory, Elsevier, vol. 109(2), pages 283-299, April.
    13. Jess Benhabib & Pengfei Wang & Yi Wen, 2017. "Uncertainty and Sentiment-Driven Equilibria," Studies in Economic Theory, in: Kazuo Nishimura & Alain Venditti & Nicholas C. Yannelis (ed.), Sunspots and Non-Linear Dynamics, chapter 0, pages 281-304, Springer.
    14. Shubik, Martin, 1990. "A game theoretic approach to the theory of money and financial institutions," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 5, pages 171-219, Elsevier.
    15. Goenka, Aditya & Kelly, David L. & Spear, Stephen E., 1998. "Endogenous Strategic Business Cycles," Journal of Economic Theory, Elsevier, vol. 81(1), pages 97-125, July.
    16. Friedman, Daniel & Rabanal, Jean Paul & Rud, Olga A. & Zhao, Shuchen, 2022. "On the empirical relevance of correlated equilibrium," Journal of Economic Theory, Elsevier, vol. 205(C).
    17. Peter T Leeson, 2014. "Oracles," Rationality and Society, , vol. 26(2), pages 141-169, May.
    18. Frank Heinemann, 1997. "Rationalizable expectations and sunspot equilibria in an overlapping-generations economy," Journal of Economics, Springer, vol. 65(3), pages 257-277, October.
    19. Indrajit Ray & Sonali Sen Gupta, 2012. "Coarse correlated Equilibria in Linear Duopoly Games," Discussion Papers 11-14rr, Department of Economics, University of Birmingham.
    20. Kam-Chau Wong & Chongmin Kim, 2004. "Evolutionarily Stable Correlation," Econometric Society 2004 Far Eastern Meetings 495, Econometric Society.
    21. Thorsten Hens & Beate Pilgrim & Janos Mayer, "undated". "Existence of Sunspot Equilibria and Uniqueness of Spot Market Equilibria: The Case of Intrinsically Complete Markets," IEW - Working Papers 188, Institute for Empirical Research in Economics - University of Zurich.
    22. Hens, Thorsten & Pilgrim, Beate, 2004. "Sunspot Equilibria and the Transfer Paradox," Discussion Papers 2004/14, Norwegian School of Economics, Department of Business and Management Science.
    23. Arifovic, Jasmina & Jiang, Janet Hua, 2019. "Strategic uncertainty and the power of extrinsic signals– evidence from an experimental study of bank runs," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 1-17.

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