Expectations Equilibria with Dispersed Information: Existence with Approximate Rationality in a Model with a Continuum of Agents and Finitely Many States of the World

Beth Allen

The Review of Economic Studies, 1983, vol. 50, issue 2, 267-285

Abstract: A model of a large economy in which prices transmit information (about the "state of the world" which is an argument in consumers' utility functions) from more informed to less informed agents is analysed. The basic hypothesis is that the forecast functions of imperfectly informed agents are suitably dispersed. For any such distribution of forecasts, market clearing prices exist. Moreover, there is always an equilibrium in which each agent's expectations are approximately rational.

Date: 1983
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