Private Uncertainty and Multiplicity
AbstractThis paper provides the conditions under which small enough private uncertainty on an aggregate endogenous state of the economy can invalidate uniqueness of the equilibrium. The main result is presented in a fully microfounded macroeconomic model where agents learn from arising prices. The findings apply to a broad class of static signal extraction problems where both fundamental correlation and pay-off externalities jointly contribute to a multiplicity of equilibria. The cases where only one of these two determinants is sufficient for a multiplicity are also isolated and discussed.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 387.
Length: 50 pages
Date of creation: 2012
Date of revision:
dispersed information; coordination of expectations; second-order beliefs.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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