On the uniqueness of fully informative rational expectations equilibria |
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Authors: | Peter DeMarzo Costis Skiadas |
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Institution: | (1) J.L. Kellogg Graduate School of Management, Northwestern University, Evanston, IL 60208-2001, USA (e-mail: c-skiadas@nwu.edu), US |
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Abstract: | Summary. This paper analyzes two equivalent equilibrium notions under asymmetric information: risk neutral rational expectations equilibria
(rn-REE), and common knowledge equilibria. We show that the set of fully informative rn-REE is a singleton, and we provide
necessary and sufficient conditions for the existence of partially informative rn-REE. In a companion paper (DeMarzo and Skiadas
(1996)) we show that equilibrium prices for the larger class of quasi-complete economies can be characterized as rn-REE. Examples
of quasi-complete economies include the type of economies for which demand aggregation in the sense of Gorman is possible
(with or without asymmetric information), the setting of the Milgrom and Stokey no-trade theorem, an economy giving rise to
the CAPM with asymmetric information but no normality assumptions, the simple exponential-normal model of Grossman (1976),
and a case of no aggregate endowment risk. In the common-knowledge context, we provide necessary and sufficient conditions
for a common knowledge posterior estimate, given common priors, to coincide with the full communication posterior estimate.
Received: May 29, 1997; revised version: July 18, 1997 |
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Keywords: | JEL Classification Numbers: D82 D84 G12 |
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