Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/59633
Authors: 
De Castro, Luciano I.
Pesce, Marialaura
Yannelis, Nicholas C.
Year of Publication: 
2010
Series/Report no.: 
Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1528
Abstract: 
We introduce a new notion of rational expectations equilibrium (REE) called maximin rational expectations equilibrium (MREE), which is based on the maximin expected utility (MEU) formulation. In particular, agents maximize maximin expected utility conditioned on their own private information and the information that the equilibrium prices generate. Maximin equilibrium allocations need not to be measurable with respect to the private information of each individual and with respect to the information that the equilibrium prices generate, as it is in the case of the Bayesian REE. We prove that a maximin REE exists universally (and not generically as in Radner (1979) and Allen (1981)), it is efficient and incentive compatible. These results are false for the Bayesian REE.
Document Type: 
Working Paper

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