Attainment of rational expectations equilibria in asset markets calls for the price system to disseminate traders' private information to others. It is known that markets populated by asymmetrically-informed profit-motivated human traders can converge to rational expectations equilibria. This...

Information aggregation is a key economic function of markets. Evidence on limitations of human cognitive abilities have led some to doubt the usefulness and relevance of rational expectations equilibria in modeling information aggregation. We report results of a computational experiment with...

This paper assesses the accuracy of individuals' expectations of their financial circumstances, as reported in the British Household Panel Survey, as predictors of outcomes and identifies what factors influence their reliability. As the data are qualitative bivariate ordered probit models,...

Players from two populations, predictors and predictees, are randomly matched in a game--theoretic version of Newcomb's Problem. Predictors are able to predict the predictees' choices by observing their type. There are two types of predictees, those who take their predictability into account by...

Under rational expectations, monetary policy is generally highly effective in stabilizing the economy. Aggregate demand management operates through the expectations hypothesis of the term structure: Anticipated movements in future short-term interest rates control current demand. This paper...

The purpose of this paper is to provide a non-technical exposition of the main conclusions of the theory of Rational Belief Equilibrium (RBE) for market volatility. It is argued that the theory of Rational Belief Equilibria (RBE) provides a unified paradigm for explaining market volatility by...

Endogenous Uncertainty is that component of economic risk and market volatility which is propagated within the economy by the beliefs and actions of agents. The theory of Rational Belief (see Kurz [1994]) permits rational agents to hold diverse beliefs and consequently, a Rational Belief...

Prices may differ between regional markets if transport capacities are limited. We develop a new approach to determine to which extent such differences stem from limited participation in cross-border trader, i.e. lack of integration, rather than from bottlenecks. This approach considers both...

We analyze determinacy and stability under learning (E-stability) of rational expectations equilibria in the Blanchard and Galí (2006, 2008) New-Keynesian model of inflation and unemployment, where labor market frictions due to costs of hiring workers play an important role. We derive results...

This paper presents a market with asymmetric information where a privately revealing equilibrium obtains in a competitive framework and where incentives to acquire information are preserved. The equilibrium is efficient, and the paradoxes associated with fully revealing rational expectations...