Autori
Privileggi, Fabio
Montrucchio, Luigi

Titolo
On fragility of cuccles in equilibrium asset pricing models of Lucas-type
Periodico
International Center for Economics Research, Torino. ICER - Working papers series
Anno: 2001 - Fascicolo: 5 - Pagina iniziale: 1 - Pagina finale: 30

In this paper we study the existence of bubbles for pricing equilibria in a pure exchange economy à la Lucas, with infinitely lived homogeneous agents. The model is analyzed under fairly general assumptions: no restrictions either on the stochastic process governing dividends' distribution or on the utilities (possibly unbounded) are required. We prove that the pricing equilibrium is unique as long as the agents exhibit uniformly boundend relative risk aversion. A generic uniqueness results is also given regadless of agent's preferences. A few "pathological" examples of economies exhibiting pricing equilibria with bubble components are contructed. Finally, a possible relationship between our approach and the theory developed by Santos and Woodford on ambiguous bubbles is investigated. The whole discussion sheds more insight on the common belief that bubbles are a marginal phenomenon in such models.




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