Are more risk averse agents more optimistic? Insights from a rational expectations model

We analyse a model of partially revealing, rational expectations equilibrium with diverse information, endogenous beliefs formation and uncertain distribution of risk aversion. More risk averse agents are then more optimistic. Such a positive correlation is important for collective decision analysis.     

Consumption dynamics under information processing constraints

This paper studies how “rational inattention” (RI)—a type of information processing constraint proposed by Sims [Sims, C.A., 2003. Implications of rational inattention, Journal of Monetary Economics 50 (3), 665–690]—affects the joint dynamics of consumption and income in a permanent income model with general income processes. Specifically, I propose an analytical approach to solve the multivariate permanent income model with RI and examine its implications for optimal consumption, saving, and welfare. It is shown that RI can affect the relative volatility of consumption and provide an endogenous propagation mechanism that disentangles the short-run and long-run responses of consumption to exogenous income shocks. I also explore how aggregation reduces the impact of the RI-induced endogenous noise on consumption and thus increases the smoothness of aggregate consumption. Finally, I compare RI with four alternative hypotheses (habit formation, signal extraction, robustness, and inattentiveness) by examining their implications for the joint behavior of consumption and income.     

Weakly rational expectations

Aumann and Drèze (2008) characterised the set of interim expected payoffs that players may have in rational belief systems, in which there is common knowledge of rationality and a common prior. We show here that common knowledge of rationality is not needed: when rationality is satisfied in the support of an action-consistent distribution (a concept introduced by Barelli (2009)), one obtains exactly the same set of rational expectations, despite the fact that in such ‘weakly rational belief systems’ there may not be mutual knowledge of rationality, let alone common knowledge of rationality. In the special case of two-player zero-sum games, the only expected payoff is the minmax value, even under these weak assumptions.     

Assessing the efficacy of rational budgeting approaches: fiscal recovery planning and municipal budgetary solvency

ABSTRACT

This study assesses the effects of financial recovery planning on the budgetary solvency of US cities. Budgetary solvency is the ability of governments to meet their service responsibilities and other financial obligations in a fiscal year. Financial recovery planning, which is based on rational decision-making theory, is designed to help cities recover from fiscal stress by facilitating diagnosis of fiscal problems, and the implementation of short- and long-term fiscal recovery strategies. Using data from a national survey of cities and multi-year audited financial reports, the results of the regression analyses show that planning is associated with stronger budgetary solvency, but its effectiveness varies across cities. Specifically, planning helps majority of fiscally struggling cities, but not those facing extreme fiscal decline.     

Bayesian–Walrasian equilibria: beyond the rational expectations equilibrium

In general rational expectations equilibrium (REE), as introduced in Radner (Econometrica 47:655–678, 1978) in an Arrow–Debreu–McKenzie setting with uncertainty, does not exist. Moreover, it fails to be fully Pareto optimal and incentive compatible and is also not implementable as a perfect Bayesian equilibrium of an extensive form game (Glycopantis et al. in Econ Theory 26:765–791, 2005). The lack of all the above properties is mainly due to the fact that the agents are supposed to predict the equilibrium market clearing price (as agent’s expected maximized utility is conditioned on the information that equilibrium prices reveal), which leads inevitably to the presumption that agents know all the primitives in the economy, i.e., random initial endowments, random utility functions and private information sets. To get around this problematic equilibrium notion, we introduce a new concept called Bayesian–Walrasian equilibrium (BWE) which has Bayesian features. In particular, agents try to predict the market-clearing prices using Bayesian updating and evaluate their consumption in terms of Bayesian price estimates, which are different for each individual. In this framework agents maximize expected utility conditioned on their own private information about the state of nature, subject to a Bayesian estimated budget constraint. Market clearing is not an intrinsic part of the definition of BWE. However, both in the case of perfect foresight and in the case of symmetric information BWE leads to a statewise market clearing; it then becomes an ex post Walrasian equilibrium allocation. This new BWE exists under standard assumptions, in contrast to the REE. In particular, we show that our new BWE exists in the well-known example in Kreps (J Econ Theory 14:32–43, 1977), where REE fails to exist. This work was done in the Spring of 2005, when EJB was a visiting professor at the University of Illinois.     

关于中国现时期需求不足的理性分析与对策思考

本文对我国现时期出现的需求不足问题进行了理性分析,并进一步从理论和实践的结合上论证了产生这一问题的主要原因是：通货紧缩、普遍性供给过剩、消费预期恶化。本文的宗旨是为政府采取治理需求不足政策提供理论根据。     

中国的最优化动态IS-LM模型构建与应用

传统的IS-LM模型由于存在许多缺陷一直以来都备受批评。理性预期革命之后出现的基于跨期动态最优化的IS-LM模型却能够很好地克服传统的缺陷,逐渐受到当代宏观经济学家的青睐。本文尝试在最优化IS-LM基本模型的基础上,引入对定期存款的配置行为,加入政府和国外部门,将模型拓展为四部门三资产模型,然后利用中国数据采用理性预期的方法对参数进行估计,并解释了方程系数的含义。最后对于模型如何实现动态化用以描述经济的演化作了一些探讨。     

Understanding the dynamics of review posting and the management intervention effects on those dynamics

The purposes of the paper are (1) to examine the dynamic properties of online reviews, focusing on whether previous review trends contribute to herding or reactant behavior in subsequent review rating generation (dynamic flow), and (2) to explore the business value of management responses in the dynamic flow of online reviews based on Social Impact Theory and Rational Action Theory as the foundation. To this end, we analyze a series of regression and logistic models with quasi-experimental cases from a large online review dataset, collected from a leading online travel website in China. We find that both types of previous trends of reviews, positive and negative, contribute to reactant behavior in subsequent review rating generation. When the review trends are considered with management responses, we find that management responses have a positive impact on subsequent review ratings in the negative review trend, but not in the positive review trend.     

Economic planning for market economies : The optimality of planning in an economy with uncertainty and asymmetrical information

The paper is based on a disequilibrium model which is Keynesian in the ‘short run’, ie with given expectations, but which admits of a continuum of equilibria when expectations are rational. Expectations are adaptive (so that they are rational only in the long run) but can be influenced by an indicative plan. The government and the private sector have differing information sets, each knowing some things the other sector does not (spontaneously) know. It is shown that in this world, an optimal plan dominates a self-fulfilling plan, which in turn dominates a no-planning equilibrium.     

从东北地区增值税转型效果谈我国的增值税改革

文中通过总结东北地区实行增值税改革所取得的效果,分析增值税在不同历史经济发展阶段所起的作用。从我国现行经济状况及国际增值税发展趋势分析出现行增值税的不足,强调现阶段增值税改革在我国的必要性。从而得出现阶段我国实行增值税转型、改革是十分必要的。