Decoupling Markets and Individuals: Rational Expectations Equilibrium Outcomes from Information Dissemination among Boundedly-Rational Traders

Karim Jamal, Michael Maier and Shyam Sunder
Additional contact information
Karim Jamal: University of Alberta
Michael Maier: University of Alberta

No 1868, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Attainment of rational expectations equilibria in asset markets calls for the price system to disseminate traders� private information to others. It is known that markets populated by asymmetrically-informed profit-motivated human traders can converge to rational expectations equilibria. This paper reports comparable market outcomes when human traders are replaced by boundedly-rational algorithmic agents who use a simple means-end heuristic. These algorithmic agents lack the capability to optimize; yet outcomes of markets populated by them converge near the equilibrium derived from optimization assumptions. These findings suggest that market structure is an important determinant of efficient aggregate level outcomes, and that care is necessary not to overstate the importance of human cognition and conscious optimization in such contexts.

Keywords: Bounded rationality; Dissemination of asymmetric information; Efficiency of security markets; Minimally-rational agents; Rational expectations; Structural properties of markets (search for similar items in EconPapers)
JEL-codes: C92 D44 D50 D70 D82 G14 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-07
New Economics Papers: this item is included in nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d18/d1868.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:1868

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().