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Partial revelation with rational expectations

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  • HEIFETZ, Aviad
  • POLEMARCHAKIS, Heracles M.

Abstract

For alternative specifications of an economy under uncertainty, we build a partially revealing Rational Expectations Equilibrium (REE). At equilibrium, no individual knows the state of the world or the quantities traded by other individuals. The combination of these partial revelation properties is not a feature of the examples of partial revelation in the literature. A general proposition characterizes the residual dimension of uncertainty at a smooth REE.
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Suggested Citation

  • HEIFETZ, Aviad & POLEMARCHAKIS, Heracles M., 1998. "Partial revelation with rational expectations," LIDAM Reprints CORE 1324, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1324
    DOI: 10.1006/jeth.1998.2391
    Note: In : Journal of Economic Theory, 80, 171-181, 1998
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    References listed on IDEAS

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    1. Dutta, Jayasri & Morris, Stephen, 1997. "The Revelation of Information and Self-Fulfilling Beliefs," Journal of Economic Theory, Elsevier, vol. 73(1), pages 231-244, March.
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    3. Polemarchakis, H M & Siconolfi, P, 1993. "Asset Markets and the Information Revealed by Prices," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(4), pages 645-661, October.
    4. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-678, May.
    5. Jordan, James S. & Radner, Roy, 1982. "Rational expectations in microeconomic models: An overview," Journal of Economic Theory, Elsevier, vol. 26(2), pages 201-223, April.
    6. Sanford J. Grossman, 1977. "The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 431-449.
    7. Ausubel, Lawrence M., 1990. "Partially-revealing rational expectations equilibrium in a competitive economy," Journal of Economic Theory, Elsevier, vol. 50(1), pages 93-126, February.
    8. Diamond, Douglas W. & Verrecchia, Robert E., 1981. "Information aggregation in a noisy rational expectations economy," Journal of Financial Economics, Elsevier, vol. 9(3), pages 221-235, September.
    9. Allen, Beth, 1981. "A class of monotone economies in which rational expectations equilibria exist but prices do not reveal all information," Economics Letters, Elsevier, vol. 7(3), pages 227-232.
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    Cited by:

    1. Scott Condie & Jayant V. Ganguli, 2011. "Ambiguity and Rational Expectations Equilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(3), pages 821-845.
    2. Zigrand, Jean-Pierre, 2001. "Rational limits to arbitrage," LSE Research Online Documents on Economics 25068, London School of Economics and Political Science, LSE Library.
    3. Jean-Pierre Zigrand, 2001. "Rational Limits to Arbitrage," FMG Discussion Papers dp392, Financial Markets Group.
    4. Lall Ramrattan & Michael Szenberg, 2012. "The impact of The General Theory on Economic Theory and the Development of Public Policies: A Nested Vision of Keynes’s Ideas with the Classical Vision through a Panoramic View of his Works," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 8, Edward Elgar Publishing.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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