Rational Expectation Can Preclude Trades
AbstractWe consider a pure exchange economy under uncertainty in which the traders have the non-partition structure of information. They willing to trade the amounts of state-contingent commodities and they know their own expectations. Common knowledge of these conditions among all the traders can preclude trade if the initial endowments allocation is ex-ante Pareto optimal. Furthermore we introduce rational expectations equilibrium under the non-partition information, and prove the existence theorem and the fundamental theorems of welfare economics.
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Bibliographic InfoPaper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2002-01.
Length: 28 p.
Date of creation: Nov 2003
Date of revision:
Economy with knowledge; Rational expectations equilibrium; No trade theorem; Ex-ante Pareto optimum; Common-knowledge;
Find related papers by JEL classification:
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
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