Speculative Trade Equilibria with Incorrect Price Anticipations
AbstractThis paper introduces an equilibrium concept for boundedly rational agents who base their demand-supply decisions on incorrect price anticipations. Formally, we differentiate between equilibrium and out-of-equilibrium states. If the agents attach zero prior probability to all out-of-equilibrium states, our equilibrium concept coincides with Radner's (1979) concept of rational expectations equilibria (=REE). In contrast to REE, however, there may exist strict incentives for speculative asset trade whenever boundedly rational agents regard out-of-equilibrium states as possible.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201335.
Length: 10 pages
Date of creation: Jul 2013
Date of revision:
Bounded Rationality; Speculative Trade; Rational Expectations; Incorrect Prices;
Other versions of this item:
- Alexander Zimper, 2013. "Speculative Trade Equilibria with Incorrect Price Anticipations," Working Papers 358, Economic Research Southern Africa.
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-MIC-2013-07-28 (Microeconomics)
- NEP-UPT-2013-07-28 (Utility Models & Prospect Theory)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta).
If references are entirely missing, you can add them using this form.