Consider an exchange economy with asymmetric information. What is the set of outcomes that are consistent with common knowledge of rationality and market clearing? We propose the concept of CKRMC as an answer to this question. The set of price functions that are CKRMC is the maximal set F with the property that every f?F defi?nes prices that clear the markets for demands that can be rationalized by some profile of subjective beliefs on F. Thus, the difference between CKRMC and Rational Expectations Equilibrium (REE) is that CKRMC allows for a situation where the agents do not know the true price function and furthermore may have different beliefs about it. We characterize CKRMC, study its properties, and apply it to a general class of economies with two commodities. CKRMC manifests intuitive properties that stand in contrast to the full revelation property of REE. In particular, we obtain that for a broad class of economies: (1) There is a whole range of prices that are CKRMC in every state. (2) The set of CKRMC outcomes is monotonic with the amount of information in the economy.
|Date of creation:||Nov 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.ratio.huji.ac.il/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- DUTTA, Jayasri & MORRIS, Stephen, 1995.
"The Revelation of Information and Self-Fulfilling Beliefs,"
CORE Discussion Papers
1995076, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dutta, Jayasri & Morris, Stephen, 1997. "The Revelation of Information and Self-Fulfilling Beliefs," Journal of Economic Theory, Elsevier, vol. 73(1), pages 231-244, March.
- Jayasri Dutta & Stephen Morris, . "The Revelation of Information and Self-Fulfilling Beliefs," Penn CARESS Working Papers 269cceedcbd401a5e46548b88, Penn Economics Department.
- Jayasri Dutta & Stephen Morris, . ""The Revelation of Information and Self-Fulfilling Beliefs''," CARESS Working Papres 95-03, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Stephen Morris, .
""Justifying Rational Expectations'',"
CARESS Working Papres
95-04, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Guesnerie, R., 1999.
"Anchoring Economic Predictions in Common Knowledge,"
DELTA Working Papers
1999-06, DELTA (Ecole normale supérieure).
- R. Guesnerie, 2002. "Anchoring Economic Predictions in Common Knowledge," Econometrica, Econometric Society, vol. 70(2), pages 439-480, March.
When requesting a correction, please mention this item's handle: RePEc:huj:dispap:dp461. 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: (Ilan Nehama)
If references are entirely missing, you can add them using this form.