In a two-period sunspot economy with inside money and S possible realizations of the sunspot, we prove that, genetically in the space of utility functions, there are S - 1 degrees of real indeterminacy. This result generalizes the previously known result for sunspot models that, generically in endowments, there is at least one degree of real indeterminacy. The proof involves showing that generically the equilibrium allocation is different across states for some household. This property allows us to perturb the utility function in a simple way and to apply standard transversality arguments to prove our main theorem.
ASJC Scopus subject areas
- Economics and Econometrics