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Rational Expectation Can Preclude Trades


  • Matsuhisa, Takashi
  • Ishikawa, Ryuichiro


We consider a pure exchange economy under uncertainty in which the traders have the non-partition structure of information. They willing to trade the amounts of state-contingent commodities and they know their own expectations. Common knowledge of these conditions among all the traders can preclude trade if the initial endowments allocation is ex-ante Pareto optimal. Furthermore we introduce rational expectations equilibrium under the non-partition information, and prove the existence theorem and the fundamental theorems of welfare economics.

Suggested Citation

  • Matsuhisa, Takashi & Ishikawa, Ryuichiro, 2003. "Rational Expectation Can Preclude Trades," Discussion Papers 2002-01, Graduate School of Economics, Hitotsubashi University.
  • Handle: RePEc:hit:econdp:2002-01 Note: April, 2002; Revised: November, 2003

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    References listed on IDEAS

    1. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-472, August.
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    More about this item


    Economy with knowledge; Rational expectations equilibrium; No trade theorem; Ex-ante Pareto optimum; Common-knowledge;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets


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