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Partial Consensus in Large Games and Markets

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  • Gabriel Desgranges
  • Sayantan Ghosal

Abstract

When is partial consensus compatible with equilibrium and when does it lead to non-equilibrium outcomes in large games and markets? In this paper, (a) we develop a new solution concept that allows for partial consensus about the outcomes of strategic and market interaction, and (b) an associated, continuous measure of the degree of stability, via belief coordination, for equilibrium outcomes. We differentiate the properties of our concepts from related notions developed elsewhere. In an economic application we examine the foundations of intertemporal trade via belief coordination in a two period economy and show that, under certain conditions, partial consensus over future prices is consistent with an asset price bubble.

Suggested Citation

  • Gabriel Desgranges & Sayantan Ghosal, 2021. "Partial Consensus in Large Games and Markets," Working Papers 2021_02, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:2021_02
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    References listed on IDEAS

    as
    1. Ghosal, Sayantan, 2006. "Intertemporal coordination in two-period markets," Journal of Mathematical Economics, Elsevier, vol. 43(1), pages 11-35, December.
    2. Michael Woodford, 2013. "Macroeconomic Analysis Without the Rational Expectations Hypothesis," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 303-346, May.
    3. George W Evans & Roger Guesnerie & Bruce McGough, 2019. "Eductive Stability in Real Business Cycle Models," The Economic Journal, Royal Economic Society, vol. 129(618), pages 821-852.
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    6. Balasko, Yves, 1994. "The expectational stability of Walrasian equilibria," Journal of Mathematical Economics, Elsevier, vol. 23(2), pages 179-203, March.
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    More about this item

    Keywords

    p-consensus; p-stability; common knowledge; rationalizability; heterogeneous beliefs; coordination; games; markets;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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