Self-Fulfilling Mechanisms and Rational Expectations

Minelli, Enrico; Forges, Françoise

Minelli, Enrico; Forges, Françoise (1997), Self-Fulfilling Mechanisms and Rational Expectations, Journal of Economic Theory, 75, 2, p. 388–406. http/dx.doi.org/10.1006/jeth.1997.2290

Type

Article accepté pour publication ou publié

Date

1997-08

Journal name

Journal of Economic Theory

Volume

Number

Publisher

Elsevier

Pages

388–406

Abstract (EN)

We introduce a class of communication equilibria, which we call self-fulfilling mechanisms, and show that they provide a game-theoretic foundation to rational expectations equilibria. LetEbe an exchange economy with differential information. We associate a strategic market gameΓ(E) withE. We prove that the allocations achieved through a self-fulfilling mechanism inΓ(E) coincide with the rational expectations equilibrium allocations inE. In order to understand how self-fulfilment can be realized in a dynamic framework, we investigate the relationship between self-fulfilling mechanisms inΓ(E) and Nash equilibria of theT-stage repeated gameΓT(E)

Subjects / Keywords

Nash equilibrium; Equilibrium strategies; Non-cooperative game; Game-theory

JEL

D82 - Asymmetric and Private Information; Mechanism Design
C72 - Noncooperative Games