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Comparing Sunspot Equilibrium And Lottery Equilibrium Allocations: The Finite Case*
Author(s) -
Garratt Rod,
Keister Todd,
Shell Karl
Publication year - 2004
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2004.00129.x
Subject(s) - lottery , converse , economics , sunspot , mathematical economics , class (philosophy) , partial equilibrium , general equilibrium theory , sequential equilibrium , microeconomics , mathematics , equilibrium selection , computer science , physics , game theory , quantum mechanics , magnetic field , geometry , repeated game , artificial intelligence
Sunspot equilibrium and lottery equilibrium are two stochastic solution concepts for nonstochastic economies. We compare these concepts in a class of completely finite, (possibly) nonconvex exchange economies with perfect markets, which requires extending the lottery model to the finite case. Every equilibrium allocation of our lottery model is also a sunspot equilibrium allocation. The converse is almost always true. There are exceptions, however: For some economies, there exist sunspot equilibrium allocations with no lottery equilibrium counterpart.