SFB 303 Discussion Paper No. A - 354

Author: Hens, Thorsten
Title: Sunspot Equilibria in Finite Horizon Models with Incomplete Markets
Abstract: The purpose of this paper is to clarify the relationship between the uniqueness of spot market equilibria and the existence of sunspot equilibria in a two periods general equilibrium model with incomplete real asset markets and no first period comsumption. It is shown by an example with Cobb-Douglas preferences and numeraire assets that sunspot equilibria exist even though spot market equilibria are unique for all distributions of ex post endowments which can be reached by using ex ante asset trade. Moreover it is shown that generically non sunspot equilibria are locally unique so that there do not exist local sunspot equilibria.
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Creation-Date: November 1991
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