On the equivalence of rational expectations equilibrium with perfect Bayesian equilibrium

Cheng-Zhong Qin () and Xintong Yang ()
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Cheng-Zhong Qin: Nanjing Audit University
Xintong Yang: Capital University of Economics and Business

Economic Theory, 2020, vol. 69, issue 4, No 8, 1127-1146

Abstract: Abstract A sequential variation of the Arrow–Debreu abstract economy is developed to closely capture the timing of moves of the Walrasian general equilibrium model. Instead of inducing a pseudo- game, the extensive form game of our sequential variation is well defined. It is shown that when information is symmetric, Walrasian equilibrium allocations are equivalent to subgame-perfect equilibrium allocations. When information is asymmetric, rational expectations equilibrium allocations are shown to be equivalent to perfect Bayesian equilibrium allocations. These results are useful for understanding and characterizing Walrasian and rational expectations equilibrium allocations.

Keywords: Abstract economy; Perfect Bayesian equilibrium; Rational expectations equilibrium; Subgame-perfect equilibrium; Walrasian equilibrium (search for similar items in EconPapers)
JEL-codes: D50 D51 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s00199-019-01192-w

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