Non-implementation of rational expectations as a perfect Bayesian equilibrium

Dionysius Glycopantis (), Allan Muir () and Nicholas Yannelis ()

Economic Theory, 2005, vol. 26, issue 4, 765-791

Abstract: We point out several conceptual difficulties of the rational expectations equilibrium concept. In particular we show that such an equilibrium need not be incentive compatible and need not be implementable as a perfect Bayesian equilibrium . A comparison of rational expectations equilibria with the private core is also provided. We conclude that the private core is a more appropriate concept to capture the idea of contracts under asymmetric information. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Differential information economy; Rational expectations equilibrium; Coalitional Bayesian incentive compatibility; Implementation; Game trees; Private core. (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s00199-004-0585-2

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