Journal article
Existence, incentive compatibility and efficiency of the rational expectations equilibrium
Games and economic behavior, Vol.76(1), pp.329-339
09/01/2012
DOI: 10.1016/j.geb.2012.05.006
Abstract
The rational expectations equilibrium (REE), as introduced in Radner (1979) in a general equilibrium setting à la Arrow–Debreu–McKenzie, often fails to have desirable properties such as universal existence, incentive compatibility and efficiency. We resolve those problems by providing a new model which makes the REE a desirable solution concept. In particular, we consider an asymmetric information economy with a continuum of agents whose private signals are independent conditioned on the macro states of nature. For such an economy, agents are allowed to augment their private information by the available public signals. We prove the existence, incentive compatibility and efficiency for this new REE concept.
Details
- Title: Subtitle
- Existence, incentive compatibility and efficiency of the rational expectations equilibrium
- Creators
- Yeneng Sun - National University of SingaporeLei Wu - National University of SingaporeNicholas C. Yannelis - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Games and economic behavior, Vol.76(1), pp.329-339
- Publisher
- Elsevier Inc
- DOI
- 10.1016/j.geb.2012.05.006
- ISSN
- 0899-8256
- eISSN
- 1090-2473
- Language
- English
- Date published
- 09/01/2012
- Academic Unit
- Economics
- Record Identifier
- 9984380523402771
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