Comparing Sunspot Equilibrium And Lottery Equilibrium Allocations: The Finite Case

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. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.