IDEAS home Printed from https://ideas.repec.org/p/upd/utmpwp/024.html
   My bibliography  Save this paper

Efficiency, Quality of Forecasts and Radner Equilibria

Author

Listed:
  • Shurojit Chatterji

    (Singapore Management University)

  • Atsushi Kajii

    (Kwansei Gakuin University)

Abstract

We study a simple two period economy with no uncertainty and complete markets where agents trade based on forecasts about the second period spot price. We propose as our solution concept a set of forecasts with the following properties: there exist (heterogenous) forecasts contained in this set that lead to efficient allocations, the set contains only those forecasts that correspond to some efficient equilibrium, and finally that the forecasts assign positive probability to the actual market clearing spot price. We call such a set of prices an efficient equilibrium with ambiguity, and interpret it as a generalization of Radner equilibrium that delivers efficient allocations under forecasts that possess a self-fulfilling property that is weaker than perfect foresight.

Suggested Citation

  • Shurojit Chatterji & Atsushi Kajii, 2020. "Efficiency, Quality of Forecasts and Radner Equilibria," Working Papers on Central Bank Communication 024, University of Tokyo, Graduate School of Economics.
    • Handle: RePEc:upd:utmpwp:024
    as

    Download full text from publisher

    File URL: https://www.centralbank.e.u-tokyo.ac.jp/wp-content/uploads/2020/06/cb-wp024.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
    2. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702, January.
    3. Grandmont, Jean-Michel, 1993. "Temporary general equilibrium theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 19, pages 879-922, Elsevier.
    4. K. J. Arrow, 1964. "The Role of Securities in the Optimal Allocation of Risk-bearing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 31(2), pages 91-96.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chatterji, Shurojit & Kajii, Atsushi, 2023. "Decentralizability of efficient allocations with heterogeneous forecasts," Journal of Economic Theory, Elsevier, vol. 207(C).
    2. João Correia-da-Silva & Carlos Hervés-Beloso, 2014. "Irrelevance of private information in two-period economies with more goods than states of nature," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 55(2), pages 439-455, February.
    3. João Correia-da-Silva, 2015. "Two-period economies with price-contingent deliveries," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 509-525, August.
    4. Roger E.A. Farmer, 2019. "The Indeterminacy School in Macroeconomics," NBER Working Papers 25879, National Bureau of Economic Research, Inc.
    5. Ross M. Starr, 2012. "Why is there Money?," Books, Edward Elgar Publishing, number 13763.
    6. Roger E A Farmer, 2019. "The Indeterminacy Agenda in Macroeconomics," National Institute of Economic and Social Research (NIESR) Discussion Papers 507, National Institute of Economic and Social Research.
    7. David Bowman, 1995. "Constrained suboptimality in economies with limited communication," International Finance Discussion Papers 497, Board of Governors of the Federal Reserve System (U.S.).
    8. Auster, Sarah & Kettering, Jeremy & Kochov, Asen, 2024. "Sequential trading with coarse contingencies," Journal of Economic Theory, Elsevier, vol. 220(C).
    9. Lionel de Boisdeffre, 2013. "Price revelation and existence of equilibrium in a private belief economy," Post-Print halshs-01053471, HAL.
    10. Jürgen Eichberger & Klaus Rheinberger & Martin Summer, 2014. "Credit risk in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(2), pages 407-435, October.
    11. Lionel de Boisdeffre, 2012. "On the existence of financial equilibrium when beliefs are private," Post-Print halshs-00746975, HAL.
    12. Athreya, Kartik B., 2014. "Big Ideas in Macroeconomics: A Nontechnical View," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019736, December.
    13. Shurojit Chatterji & Atsushi Kajii & Huaxia Zeng, 2018. "Intertemporal effiiency does not imply a common price forecast," KIER Working Papers 999, Kyoto University, Institute of Economic Research.
    14. Raad, R., 2012. "Existence of an equilibrium for infinite horizon economies with and without complete information," Journal of Mathematical Economics, Elsevier, vol. 48(4), pages 247-262.
    15. repec:bas:econth:y:2012:i:2:p:35-56 is not listed on IDEAS
    16. Kirtchik, Olessia & Boldyrev, Ivan, 2024. "“Rise And Fall” Of The Walrasian Program In Economics: A Social And Intellectual Dynamics Of The General Equilibrium Theory," Journal of the History of Economic Thought, Cambridge University Press, vol. 46(1), pages 1-26, March.
    17. Elena Asparouhova & Peter Bossaerts & Nilanjan Roy & William Zame, 2016. "“Lucas” in the Laboratory," Journal of Finance, American Finance Association, vol. 71(6), pages 2727-2780, December.
    18. Jacques Dreze, 2016. "Existence and multiplicity of temporary equilibria under nominal price rigidities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 279-298, June.
    19. Lionel De Boisdeffre, 2015. "Price revelation and existence of financial equilibrium with incomplete markets and private beliefs," Working papers of CATT hal-02943034, HAL.
    20. Philippe Bich & Bernard Cornet, 2009. "Existence of pseudo-equilibria in a financial economy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00629764, HAL.
    21. Hayashi, Takashi & Lombardi, Michele, 2019. "One-step-ahead implementation," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 110-126.

    More about this item

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:upd:utmpwp:024. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yayoi Hatano (email available below). General contact details of provider: https://edirc.repec.org/data/fetokjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.