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On the stability of nonsunspot equilibria

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  • Balasko, Yves

Abstract

This paper analyzes the stability of the (Pareto efficient) nonsunspot equilibria as a function of the constraints faced by consumers in their ability to transfer wealth between states of nature. Equilibria that are stable for the certainty economy define nonsunspot equilibria that are stable in the following two polar cases: 1) All consumers are unconstrained; 2) All consumers are fully constrained. Furthermore, the stable certainty equilibria with small trade vectors define nonsunspot equilibria that are also stable independently of the constraint levels. Instability can develop only at intermediate constraint levels and for nonsunspot equilibria that feature sufficiently large trade vectors.

Suggested Citation

  • Balasko, Yves, 2012. "On the stability of nonsunspot equilibria," Journal of Economic Theory, Elsevier, vol. 147(2), pages 526-544.
    • Handle: RePEc:eee:jetheo:v:147:y:2012:i:2:p:526-544
    DOI: 10.1016/j.jet.2010.09.002
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    References listed on IDEAS

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    1. Prechac, Christophe, 1996. "On Regular Symmetric Economies," Journal of Economic Theory, Elsevier, vol. 69(1), pages 198-204, April.
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    Cited by:

    1. Balasko, Yves & Geanakoplos, John, 2012. "Introduction to general equilibrium," Journal of Economic Theory, Elsevier, vol. 147(2), pages 400-406.

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    More about this item

    Keywords

    Sunspot equilibria; Stability; Bifurcation; Market participation;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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