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The Revelation of Information and Self-Fulfilling Beliefs

Jayasri Dutta () and Stephen Morris

No 1995076, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: At a Rational Expectations Equilibrium (REE), individuals are assumed to know the map from states to prices. This hypothesis has two components, that agents agree (consensus), and that they have point expectations (degeneracy). We consider economies where agents' beliefs are described by a joint distribution on states and prices, and these beliefs are fulfilled at equilibrium. Beliefs are self-fulfilling if every price in the support of the distribution is an equilibrium price. The corresponding equilibria are Beliefs Equilibria (BE). The further restriction that agents have the same beliefs results in Common Beliefs Equilibria (CBE). We study the relationship between BE, CBE, and REE, thus isolating the role of consensus and of degeneracy in achieving rational expectations.

Date: 1995-12-01
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Related works:
Journal Article: The Revelation of Information and Self-Fulfilling Beliefs (1997) Downloads
Working Paper: The revelation of information and self-fulfilling beliefs (1997)
Working Paper: The Revelation of Information and Self-Fulfilling Beliefs Downloads
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