On the limit points of an infinitely repeated rational expectations equilibrium

Marialaura Pesce (), Niccolò Urbinati () and Nicholas C. Yannelis ()
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Marialaura Pesce: Università di Napoli “Federico II”
Niccolò Urbinati: Università di Napoli “Federico II”
Nicholas C. Yannelis: The University of Iowa

Economic Theory, 2025, vol. 80, issue 2, No 3, 465-492

Abstract: Abstract We study the rational expectations equilibrium (REE) in the framework of a repeated economy. In each repetition agents observe the sequence of asymmetric REE’s occurred in the past to update their private information. We show that, in the limit, agents reach a symmetric information REE which exists universally (and not generically) and it is Pareto efficient and obviously incentive compatible. We also prove the converse result, i.e., given a symmetric information REE, we can construct a sequence of approximate asymmetric REE allocations that converges to the symmetric information REE. In view of the above results, the symmetric information REE provides a rationalization for the asymmetric one.

Keywords: Learning; Rational expectations equilibrium; Asymmetric information; Robustness (search for similar items in EconPapers)
JEL-codes: D50 D82 D83 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00199-024-01576-7

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