Manipulation of endowments and sunspot equilibria

We study the connection between occurrence of manipulation via reallocating endowments by coalitions and sunspot equilibria. The uncertainty about which coalition will form introduces extrinsic uncertainty into the economy. Under certain conditions, manipulation of endowments by coalitions can occur if and only if sunspots matter. We would like to thank Bill Ethier, Atsushi Kajii, Cuong Le Van, Karl Shell, Koji Shimomura, Nicholas Yannelis, an anonymous referee, as well as seminar participants at the Second Asian General Equilibrium Theory Workshop, 2005, Tokyo; Workshop on Uncertainty and Information, IMS, NUS, 2005; Kobe Institute of Economic Research; Public Economic Theory 2005 Conference, Marseille; and the South and South East Asia Econometric Society Meetings, 2006, Chennai for helpful discussions and comments.