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Rational Beliefs Theory: A Review

Author

Listed:
  • Maurizio Motolese
  • Carsten Krabbe Nielsen

    (Istituto di Politica Economica, Universita' Cattolica di Milano)

Abstract

The Rational Beliefs Theory is founded on the observation that in most situations the same data may be rationally explained (in terms of a statistical model) in many different ways. This is obvious in a world where there is a limited number of observations. The novel idea of the Rational Beliefs Theory is to use a technical device (namely the concept of a non-stationary but stable measure) to formulate rational differences of opinion also in a world with «unlimited» data on the past performance of the economy. In this article we provide a non-technical introduction to the Theory of Rational Beliefs as well as a brief overview of the papers that have been written using this theory.

Suggested Citation

  • Maurizio Motolese & Carsten Krabbe Nielsen, 2007. "Rational Beliefs Theory: A Review," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 115(3), pages 293-326.
    • Handle: RePEc:vep:journl:y:2007:v:115:i:3:p:293-326
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    More about this item

    Keywords

    Expectations; Heterogeneous Beliefs; Rational Beliefs; Rational Belief Equilibrium; Endogenous Uncertainty;
    All these keywords.

    JEL classification:

    • B0 - Schools of Economic Thought and Methodology - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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