Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/221392
Authors: 
Kalai, Ehud
Lehrer, Ehud
Year of Publication: 
1990
Series/Report no.: 
Discussion Paper 1035
Abstract: 
Under the rational expectation s assumption of Muth, economic agents use their perfect knowledge of the distribution of future prices to compute optimal current actions. In private forecasts equilibrium, intorduced here, agents use subjective in accurate forecasts about future prices to compute optimal current actions. This paper studies the behavior of a group of expected-utility-maximizing, price-taking agents engaged in an infinite horizon dynamic economy. It is shown that in a private forecasts equilibrium, the subjective forecasts must eventually merge to the correct one, leading the agents to a Muth-type perfect forecast equillibrium.
Document Type: 
Working Paper

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