This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Revelation of Information in Strategic Market Games: A Critique of Rational Expectations

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Pradeep Dubey () (SUNY, Stony Brook)
John Geanakoplos () (Cowles Foundation, Yale University)
Martin Shubik () (Cowles Foundation, Yale University)

Additional information is available for the following registered author(s):

Abstract

We criticize the R.E.E. approach to asymmetric information general equilibrium because it does not explain how information gets "into" the prices. This leads to well-known paradoxes. We suggest a multiperiod game instead, where the flow of information into and out of prices is explicitly modeled. In our game Nash equilibria (N.E.) (1) generalize Walrasian equilibria to asymmetric information; (2) (2) exist generically; (3) eliminate pure speculation; (4) allow prices to reveal information and markets to become more efficient over time; (5) are consistent with the weak efficient markets hypothesis that tracking past prices is not profitable; (6) yet always lead to higher utility for better informed agents (such as experts). Throughout the paper we use one concrete game. In the last section we prove that there are a broad range of games that would have the same properties.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://cowles.econ.yale.edu/P/cp/p06b/p0686.pdf
File Format: application/pdf
File Function:
Download Restriction: no
File URL: http://cowles.econ.yale.edu/P/cd/d06a/d0634-r.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 634R.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 50 pages
Date of creation: 1982
Date of revision: Nov 1985
Publication status: Published in Journal of Mathematical Economics (1987), 16: 105-137
Handle: RePEc:cwl:cwldpp:634r

Note: CFP 686.
Contact details of provider:
Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
More information through EDIRC

Order Information:
Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

For technical questions regarding this item, or to correct its listing, contact: (Glena Ames).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Pradeep Dubey & Martin Shubik, 1979. "A Strategic Market Game with Price and Quantity Strategies," Cowles Foundation Discussion Papers 521, Cowles Foundation, Yale University. [Downloadable!]
  2. Blume, Lawrence E. & Easley, David, 1982. "Learning to be rational," Journal of Economic Theory, Elsevier, vol. 26(2), pages 340-351, April. [Downloadable!] (restricted)
  3. Pradeep Dubey & Mamoru Kaneko, 1982. "Information About Moves in Extensive Games: II," Cowles Foundation Discussion Papers 629, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  4. Allen, Beth, 1982. "Approximate equilibria in microeconomic rational expectations models," Journal of Economic Theory, Elsevier, vol. 26(2), pages 244-260, April. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthew O. Jackson & James Peck, 1997. "Asymmetric Information in a Competitive Market Game: Reexamining the Implications of Rational Expectations," Microeconomics 9711004, EconWPA. [Downloadable!]
    Other versions:
  2. Shorish, Jamsheed, 2006. "Functional Rational Expectations Equilibria in Market Games," Economics Series 186, Institute for Advanced Studies. [Downloadable!]
  3. Bochet,Olivier, 2005. "Switching from Complete to Incomplete Information," Research Memoranda 035, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
    Other versions:
  4. Aditya Goenka, 2000. "Informed Trading and the "Leakage" of Information," Economics Discussion Papers 528, University of Essex, Department of Economics. [Downloadable!]
    Other versions:
  5. Matthew O. Jackson & James Peck, 1993. "Costly Information Acquisition," Discussion Papers 1087, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  6. Pradeep Dubey & John Geanakoplos & Martin Shubik, 1988. "Default and Efficiency in a General Equilibrium Model with Incomplete Markets," Cowles Foundation Discussion Papers 879R, Cowles Foundation, Yale University, revised Feb 1989. [Downloadable!]
  7. Richard McLean & James Peck & Andrew Postlewaite, 2004. "On Price-Taking Behavior in Asymmetric Information Economies," PIER Working Paper Archive 04-040, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  8. Martin Shubik, 1993. "The Theory of Money and Financial Institutions," Cowles Foundation Discussion Papers 1056, Cowles Foundation, Yale University. [Downloadable!]
  9. Beth Allen & James S. Jordan, 1998. "The existence of rational expectations equilibrium: a retrospective," Staff Report 252, Federal Reserve Bank of Minneapolis. [Downloadable!]
Statistics
Access and download statistics

Did you know? To receive notification of recent additions to the database, subscribe to the free NEP reports.

This page was last updated on 2009-12-4.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.