The no trade principle asserts that risk-neutral agents are not prepared to trade if and only if a common prior exists. The purpose of this article is to provide general versions of this duality principle. We argue from a strategic viewpoint that completely regularity is the most general and natural topological assumption that we should make on the state space. We consider two cases. In the fir...

A geometric approach, analogous to the approach used in the additive case, is proposed to determine the conditional expectation with non-additive probabilities. The conditional expectation is then applied for (i) updating the probability when new information becomes available; and (ii) defining the notion of independence of non-additive probabilities and Nash equilibrium. Journal of Economic Li...

I analyze a model in which different agents have different non-rational expectations about the future price and cash flows of a risky asset. The beliefs in the society evolve according to a very general class of evolution functions that are monotone; that is if one type has increased its share in the population then all types with higher profit should also have increased their shares. I show th...

This study investigates experimentally whether people in retrospective are self-aware that they engage in status-seeking behavior. Subjects participated in a real-effort task where effort translated into a donation to a charity. Within-subjects we varied the visibility of their performance (private/public feedback). On average subjects exerted more effort in the public treatment. After the real...

We consider optimal monetary stabilization policy in a New Keynesian model with explicit microfoundations, when the central bank recognizes that private-sector expectations need not be precisely model-consistent, and wishes to choose a policy that will be as good as possible in the case of any beliefs close enough to model-consistency. We show how to characterize robustly optimal policy without...

We propose a model of bounded rationality based on time-costs of deliberating current and future decisions. We model an individual decision maker’s thinking process as a thought-experiment that takes time and let the decision maker ‘think ahead’ about future decision problems in yet unrealized states of nature. By formulating an intertemporal, state-contingent, planning problem, which may invol...

This paper offers a continuous time, general equilibrium model where a risky asset is traded among risk-averse overconfident investors. Two kinds of overconfidence are introduced: investors exhibit relative overconfidence if each investor believes her model is better than others’ and aggregate overconfidence if they believe signals have more information content than those in the true model. Rel...

This paper introduces heterogeneous expectations into a New Keynesian model. Our primary theoretical contribution is to provide an aggregation result for a model with nominal rigidities and heterogeneous bounded rationality. We incorporate bounded rationality at the individual agent level and determine restrictions on expectations operators sufficient to imply aggregate IS and AS relations of t...

This paper examines the issues related to the competition between two currencies in an agent-based computational economic model. The economic environment is a two-country overlapping generations economy with no restrictions on foreign currency holdings. Governments of both countries nance their de cits via seignorage. Agents make decisions about their savings and portfolio decisions. They use t...