Abstract
Correlated Equilibrium is a solution concept developed for arbitrary games, and Sunspot Equilibrium is a solution concept originally developed for competitive economic environments. In each of the two concepts, however, extrinsic uncertainty plays a major role. Extrinsic uncertainty does not affect the underlying environment in any way, but it may affect outcomes and payoffs if the uncertainty affects people’s actions. In these notes, we review the two solution concepts, and how they are related. Examples are presented in which pure speculation (trading based solely on differences in information) can be modeled as a Correlated Equilibrium or Sunspot Equilibrium.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
