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Asymmetric information and rationalizability

Listed author(s):
  • Gabriel Desgranges

    ()

  • Stéphane Gauthier

    ()

We study how asymmetric information affects the set of rationalizable solutions in a linear setup where the outcome is determined by forecasts about this same outcome. The unique rational expectations equilibrium is also the unique rationalizable solution when the sensitivity of the outcome to agents’ forecasts is less than one, provided that this sensitivity is common knowledge. Relaxing this common knowledge assumption, multiple rationalizable solutions arise when the proportion of agents who know the sensitivity is large, and the uninformed agents believe it is possible that the sensitivity is greater than one. Instability is equivalent to existence of some kind of sunspot equilibria. Copyright Springer-Verlag Berlin Heidelberg 2013

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File URL: http://hdl.handle.net/10.1007/s00199-012-0731-1
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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 54 (2013)
Issue (Month): 3 (November)
Pages: 789-804

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Handle: RePEc:spr:joecth:v:54:y:2013:i:3:p:789-804
DOI: 10.1007/s00199-012-0731-1
Contact details of provider: Web page: http://www.springer.com

Web page: http://saet.uiowa.edu/

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  1. George-Marios Angeletos & Alessandro Pavan, 2004. "Transparency of Information and Coordination in Economies with Investment Complementarities," American Economic Review, American Economic Association, vol. 94(2), pages 91-98, May.
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  3. Jeff Dominitz & Charles F. Manski, 2007. "Expected Equity Returns and Portfolio Choice: Evidence from the Health and Retirement Study," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 369-379, 04-05.
  4. Guesnerie, Roger, 1992. "An Exploration of the Eductive Justifications of the Rational-Expectations Hypothesis," American Economic Review, American Economic Association, vol. 82(5), pages 1254-1278, December.
  5. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-1028, July.
  6. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, vol. 75(4), pages 1103-1142, July.
  7. Guesnerie, Roger, 1993. "Successes and failures in coordinating expectations," European Economic Review, Elsevier, vol. 37(2-3), pages 243-268, April.
  8. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-1050, July.
  9. Roger Guesnerie & Pedro Jara-Moroni, 2011. "Expectational coordination in simple economic contexts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(2), pages 205-246, June.
  10. Arrondel, Luc & Calvo-Pardo, Hector, 2014. "Subjective return expectations, information and stock market participation: evidence from France," Discussion Paper Series In Economics And Econometrics 1415, Economics Division, School of Social Sciences, University of Southampton.
  11. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  12. repec:dau:papers:123456789/9805 is not listed on IDEAS
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