Bayesian general equilibrium

Toda, Alexis Akira

Bayesian general equilibrium

Economic Theory, 2015, vol. 58, issue 2, 375-411

Abstract: I introduce a general equilibrium model of non-optimizing agents that respond to aggregate variables (prices and the average demand profile of agent types) by putting a “prior” on their demand. An interim equilibrium is defined by the posterior demand distribution of agent types conditional on market clearing. A Bayesian general equilibrium (BGE) is an interim equilibrium such that aggregate variables are correctly anticipated. Under weak conditions, I prove the existence and the informational efficiency of BGE. I discuss the conditions under which the set of Bayesian and Walrasian equilibria coincide and show that the Walrasian equilibrium arises from a large class of non-optimizing behavior. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Bayes rule; Distribution; Kullback–Leibler information; Maximum entropy; C11; D03; D3; D51; D83 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s00199-014-0849-4

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