Functional rational expectations equilibria in market games
AbstractThe rational expectations equilibrium has been criticized as an equilibrium concept in market game environments. Such an equilibrium may not exist generically, or it may introduce unrealistic assumptions about an economic agent's knowledge or computational ability. We define a rational expectations equilibrium as a probability measure over uncertain states of nature which exploits all available information in a market game, and which exists for almost all economies. Furthermore, if retrading is allowed, it is possible for agents to compute such a 'functional rational expectations equilibrium' using straightforward numerical fixed point algorithms.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 43 (2010)
Issue (Month): 3 (June)
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- Shorish, Jamsheed, 2006. "Functional Rational Expectations Equilibria in Market Games," Economics Series 186, Institute for Advanced Studies.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
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