Asymmetric information and rationalizability created by Gabriel Desgranges & Stéphane Gauthier

By:

Desgranges, Gabriel [author]

Contributor(s):

Gauthier, Stéphane [co author]

Material type: Text

TextSeries: Economic theory ; Volume 54, number 3Heildelberg: Springer, 2013Content type:

text

Media type:

unmediated

Carrier type:

volume

ISSN:

0938-2259

Subject(s):

LOC classification:

HB119 ECO

Online resources:

Click here to access online

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.

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Holdings
Item type	Current library	Call number	Vol info	Copy number	Status	Notes	Date due	Barcode
Journal Article	Main Library - Special Collections	HB119 ECO (Browse shelf(Opens below))	Vol. 54, no. 3 (pages 789-804)	SP21289	Not for loan	For in house use
Journal Article	Main Library - Special Collections	HB119 ECO (Browse shelf(Opens below))	vol. 54, no. 3 (pages 789-804)	SP21040	Not for loan	For in house use

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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.

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