IDEAS home Printed from
   My bibliography  Save this article

Temporary Equilibrium Dynamics with Bayesian Learning


  • Chatterji Shurojit


This paper examines the stability of deterministic steady-states in a class of economies where the state -variable is one dimensional and where agents use Bayesian techniques to form expectations. Thr dynamics with learning are locally convergent if the prior mean is close to a stable perfect foresight root having modulus less than 1 and if the prior beliefs are held with enough confidence. Thr dynamics are however divergent if the prior mean or the variance of the prior distribution is sufficiently large.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Chatterji Shurojit, 1995. "Temporary Equilibrium Dynamics with Bayesian Learning," Journal of Economic Theory, Elsevier, vol. 67(2), pages 590-598, December.
  • Handle: RePEc:eee:jetheo:v:67:y:1995:i:2:p:590-598

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    2. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-678, May.
    3. Hart, Oliver D & Kreps, David M, 1986. "Price Destabilizing Speculation," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 927-952, October.
    4. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    5. Rochet, Jean-Charles. & Vila, Jean-Luc., 1991. "Insider trading and market manipulations--existence and uniqueness of equilibrium," Working papers 3318-91., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    6. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
    7. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
    8. Ausubel, Lawrence M., 1990. "Partially-revealing rational expectations equilibrium in a competitive economy," Journal of Economic Theory, Elsevier, vol. 50(1), pages 93-126, February.
    9. Ausubel, Lawrence M, 1990. "Insider Trading in a Rational Expectations Economy," American Economic Review, American Economic Association, vol. 80(5), pages 1022-1041, December.
    10. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    11. Grossman, Sanford J & Stiglitz, Joseph E, 1976. "Information and Competitive Price Systems," American Economic Review, American Economic Association, vol. 66(2), pages 246-253, May.
    12. Sanford J. Grossman, 1977. "The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 431-449.
    13. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    14. Diamond, Douglas W. & Verrecchia, Robert E., 1981. "Information aggregation in a noisy rational expectations economy," Journal of Financial Economics, Elsevier, vol. 9(3), pages 221-235, September.
    15. Anderson, Robert M. & Sonnenschein, Hugo, 1982. "On the existence of rational expectations equilibrium," Journal of Economic Theory, Elsevier, vol. 26(2), pages 261-278, April.
    16. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Wilfredo Leiva, 1999. "Adaptive learning in models with lagged variables," Economics Working Papers 413, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Chatterji, Shurojit, 2004. "Subjective temporary equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 28(9), pages 1757-1780, July.
    3. Shurojit Chatterji & Ignacio N. Lobato, 2010. "Transformations of the state variable and learning dynamics," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(4), pages 385-403.
    4. Araújo, Aloísio Pessoa de & Maldonado, Wilfredo Fernando Leiva, 2001. "A note on learning chaotic sunspot equilibrium," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 423, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:67:y:1995:i:2:p:590-598. See general 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: (Dana Niculescu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.