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An Example of Convergence to Rational Expectations with Heterogeneous Beliefs

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  • Feldman, Mark D

Abstract

Martingale convergence theorems are used to prove convergence of a sequence of temporary equilibria to the rational-expectations equilibrium. The conte xt is a partial-equilibrium model adapted from earlier work of R. Tow nsend (1978) in which agents have differing initial beliefs regarding the realization of a random variable, u, that indexes the level of a ggregate demand. To optimally choose their output level firms must co njecture the level of output of other firms, and hence must solve an infinite regress in expectations. Without imposing any restrictive di stributional assumptions, it is shown that u is measurable with respe ct to the tail s-field generated by the price process. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Feldman, Mark D, 1987. "An Example of Convergence to Rational Expectations with Heterogeneous Beliefs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 635-650, October.
    • Handle: RePEc:ier:iecrev:v:28:y:1987:i:3:p:635-50
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    Cited by:

    1. Barucci, Emilio & Landi, Leonardo, 1996. "Speculative dynamics with bounded rationality learning," European Journal of Operational Research, Elsevier, vol. 91(2), pages 284-300, June.
    2. Triebs, Thomas & Tumlinson, Justin, 2014. "Learning Capitalism The Hard Way: Evidence From Germany's Reunification," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100457, Verein für Socialpolitik / German Economic Association.
    3. Jean-Michel Grandmont, 1998. "Expectations Formation and Stability of Large Socioeconomic Systems," Econometrica, Econometric Society, vol. 66(4), pages 741-782, July.
    4. Vives, Xavier, 1997. "Learning from Others: A Welfare Analysis," Games and Economic Behavior, Elsevier, vol. 20(2), pages 177-200, August.
    5. Enrique Urbano Arellano & Xinyang Wang, 2023. "Social Learning of General Rules," Papers 2310.15861, arXiv.org.
    6. Vives, Xavier, 1996. "Social learning and rational expectations," European Economic Review, Elsevier, vol. 40(3-5), pages 589-601, April.
    7. Honkapohja, Seppo, 1995. "Bounded rationality in macroeconomics A review essay," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 509-518, June.
    8. Lennox, Clive & Li, Bing, 2014. "Accounting misstatements following lawsuits against auditors," Journal of Accounting and Economics, Elsevier, vol. 57(1), pages 58-75.
    9. Koutsougeras, Leonidas & Yannelis, Nicholas C., 1999. "Bounded rational learning in differential information economies: core and value," Journal of Mathematical Economics, Elsevier, vol. 31(3), pages 373-391, April.

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