Trading on Sunspotst

• 成果类型: Article
• 署名作者: Jovanovic, Boyan; Tsyrennikov, Viktor
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20210972
• 发表日期: 2022
• 页码: 3970-3994
• 关键词: equilibrium; debt

摘要

In a model with multiple Pareto-ranked equilibria, we show that the set of equilibria shrinks if we allow trade in assets that pay based on the realization of a sunspot acting as an equilibrium-selection device. When the probability of a low-output outcome is high, the desire to insure against it leads the poor to promise large transfers to the rich in the high-output state. The rich then lose the incentive to exert the effort needed to sustain the high output. Thus the opening of financial markets may destroy the high equilibrium. (JEL D51, D53, D82, E44, G12, G14, G21)