Private Uncertainty and Multiplicity

Gaetano Gaballo

Working papers from Banque de France

Abstract: This paper provides the conditions under which small enough private uncertainty on an aggregate endogenous state of the economy can invalidate uniqueness of the equilibrium. The main result is presented in a fully microfounded macroeconomic model where agents learn from arising prices. The findings apply to a broad class of static signal extraction problems where both fundamental correlation and pay-off externalities jointly contribute to a multiplicity of equilibria. The cases where only one of these two determinants is sufficient for a multiplicity are also isolated and discussed.

Keywords: dispersed information; coordination of expectations; second-order beliefs. (search for similar items in EconPapers)
JEL-codes: D82 D83 E3 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:387

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