Partial Consensus in Large Games and Markets

Gabriel Desgranges and Sayantan Ghosal

Working Papers from Business School - Economics, University of Glasgow

Abstract: When is partial consensus compatible with equilibrium and when does it lead to non-equilibrium outcomes in large games and markets? In this paper, (a) we develop a new solution concept that allows for partial consensus about the outcomes of strategic and market interaction, and (b) an associated, continuous measure of the degree of stability, via belief coordination, for equilibrium outcomes. We differentiate the properties of our concepts from related notions developed elsewhere. In an economic application we examine the foundations of intertemporal trade via belief coordination in a two period economy and show that, under certain conditions, partial consensus over future prices is consistent with an asset price bubble.

Keywords: p-consensus; p-stability; common knowledge; rationalizability; heterogeneous beliefs; coordination; games; markets (search for similar items in EconPapers)
JEL-codes: C70 D84 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2021_02

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