The revelation of information in strategic market games. A critique of rational expectations equilibrium
type: Item
instance of: scholarly article
title: The revelation of information in strategic market games. A critique of rational expectations equilibrium
zbMATH Open document ID: 0637.90016
DOI: 10.1016/0304-4068(87)90002-4
author: Pradeep Dubey
author: John D. Geanakoplos
author: Martin Shubik
published in: Journal of Mathematical Economics
publication date: 1987-01-01T00:00:00Z
review text: We criticize the R.E.E. approach to asymmetric information general equilibrium because it does not explain how information gets `into' the prices. This leads to well-known paradoxes. We suggest a multiperiod game instead, where the flow of information into and out of prices is explicitly modeled. In our game Nash equilibria (N.E.) (1) generalize Walrasian equilibria to asymmetric information, (2) exist generically, (3) eliminate pure speculation, (4) allow prices to reveal information and markets to become more efficient over time, (5) are consistent with the weak efficient markets hypothesis that tracking past prices is not profitable, (6) yet always lead to higher utility for better informed agents (such as experts). Throughout the paper we use one concrete game. In the last section we prove that there is a broad range of games that would have the same properties.
Mathematics Subject Classification ID: 91B24
Mathematics Subject Classification ID: 91A40
Mathematics Subject Classification ID: 91B50
Mathematics Subject Classification ID: 91B62
zbMATH DE Number: 4039588
zbMATH Keywords: asymmetric information general equilibrium
zbMATH Keywords: multiperiod game
zbMATH Keywords: Nash equilibria
zbMATH Keywords: Walrasian equilibria
MaRDI profile type: Publication
Wikidata QID: Q110908820
full work available at URL: 0304-4068(87)90002-4
OpenAlex ID: W1513038709
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description: scientific article; zbMATH DE number 4039588