Introduction to the stability of rational expectations equilibrium

Learning Within Rational-Expectations Equilibrium

Models of macroeconomic learning are populated by agents who possess a great deal of knowledge of the “true” structure of the economy, and yet ignore the impact of their own learning on that structure; they may learn about an equilibrium, but they do not learn within it. An alternative learning model is presented where agents’ decisions are informed by hypotheses they hold regarding the economy...

Introduction to Rational Expectations 2 Defining Rational Expectations 3 Illustrative Examples of Strong-form Re

Rational expectations (RE) is a collection of assumptions regarding the manner in which economic agents exploit available information to form their expectations. In its stronger forms, RE operates as a coordination device that permits the construction of a " representative agent " having " representative expectations. " These introductory notes on RE start by providing several alternative RE de...

Rational expectations and farsighted stability

In the study of farsighted coalitional behavior, a central role is played by the von Neumann-Morgenstern (1944) stable set and its modification that incorporates farsightedness. Such a modification was first proposed by Harsanyi (1974) and has recently been re-formulated by Ray and Vohra (2015). The farsighted stable set is based on a notion of indirect dominance in which an outcome can be domi...

Supplement to Toward a Strategic Foundation for Rational Expectations Equilibrium

The proof of the main result in Reny and Perry (2006) is provided here. We also provide an example in which the best reply to nondecreasing bidding functions fails to be nondecreasing, and we show how to approximate a degenerate density by one that satis…es the assumptions in Reny and Perry (2006). Finally, we establish that Reny and Perry’s (2006) main result continues to hold when the notion ...

Towards Convergence to a Rational Expectations Equilibrium: An Axiomatic Approach∗