IDEAS home Printed from https://ideas.repec.org/a/spr/joecth/v54y2013i3p789-804.html
   My bibliography  Save this article

Asymmetric information and rationalizability

Author

Listed:
  • Gabriel Desgranges

    ()

  • Stéphane Gauthier

    ()

Abstract

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

Suggested Citation

  • Gabriel Desgranges & Stéphane Gauthier, 2013. "Asymmetric information and rationalizability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 789-804, November.
  • Handle: RePEc:spr:joecth:v:54:y:2013:i:3:p:789-804
    DOI: 10.1007/s00199-012-0731-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00199-012-0731-1
    Download Restriction: Access to full text is restricted to subscribers.

    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

    as
    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.
    2. Jeff Dominitz & Charles F. Manski, 2011. "Measuring and interpreting expectations of equity returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(3), pages 352-370, April.
    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
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Asymmetric information; Common knowledge; Eductive learning; Rational expectations; Rationalizability; C62; D82; D84;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

    Statistics

    Access and download statistics

    Corrections

    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:spr:joecth:v:54:y:2013:i:3:p:789-804. 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: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.