E–stability and stability of adaptive learning in models with asymmetric information

Maik Heinemann ()
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Maik Heinemann: Institute of Economics, Leuphana University of Lüneburg

No 69, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: The paper demonstrates how the E–stability principle introduced by Evans and Honkapohja [2001] can be applied to models with heterogeneous and private information in order to assess the stability of rational expectations equilibria under learning. The paper extends already known stability results for the Grossman and Stiglitz [1980] model to a more general case with many differentially informed agents and to the case where information is endogenously acquired by optimizing agents. In both cases it turns out that the rational expectations equilibrium of the model is inherently E-stable and thus locally stable under recursive least squares learning.

Keywords: Adaptive Learning; Eductive Stability; Rational Expectations (search for similar items in EconPapers)
JEL-codes: D31 E62 O41 P16 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-12
New Economics Papers: this item is included in nep-cba and nep-mac
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