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Strategic Foundations of Efficient Rational Expectations

Author

Listed:
  • Paulo Barelli
  • Srihari Govindan
  • Robert Wilson

Abstract

We study an economy with traders whose payoffs are quasilinear and whose private signals are informative about an unobserved state parameter. The limit economy has infinitely many traders partitioned into a finite set of symmetry classes called types. Market mechanisms in a class that includes auctions yield the same outcome as the Walrasian rational expectations equilibrium if and only if the efficient allocation has a monotonicity property. Examples illustrate cases where they differ. Monotonicity restricts the heterogeneity among traders’ types.

Suggested Citation

  • Paulo Barelli & Srihari Govindan & Robert Wilson, 2024. "Strategic Foundations of Efficient Rational Expectations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(6), pages 3190-3216.
    • Handle: RePEc:oup:restud:v:91:y:2024:i:6:p:3190-3216.
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    File URL: http://hdl.handle.net/10.1093/restud/rdad116
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