Ambiguity and rational expectations equilibria∗

This paper proves the existence and robustness of partially-revealing rational expectations equilibria (REE) when this equilibrium concept is expanded to allow for some agents to have preferences that display ambiguity aversion. Furthermore, the generic existence of fullyrevealing REE is proven for a commonly-used subset of the class of ambiguity averse preferences. This finding illustrates that models with ambiguity aversion provide a relatively tractable framework through which partial information revelation may be studied in a general equilibrium setting without relying on particular distributional assumptions or the presence of noise traders. Constructive examples provide further insight into the properties of these equilibria. ∗We are grateful to David Easley, Larry Blume, Jim Jordan, Beth Allen, Paolo Siconolfi, Nicholas Yannelis, Nick Kiefer, and Eddie Dekel for helpful comments. We also thank participants at the Spring 2007 Cornell/Penn State Macro Conference, 2007 GE Europe meeting, the 2007 NBER GE conference, the Cornell Microeconomic Theory seminar for useful discussion. Condie acknowledges support from the Solomon Fund for Decision Research at Cornell University. Our e-mail addresses are scott [email protected] and [email protected].