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Justifying Rational Expectations

Stephen Morris
Princeton University - Department of Economics

March 1995

CARESS Working Paper No. 95-04

Abstract:
In a static economy with symmetric information, the informational requirements for competitive equilibrium are very weak: markets clear and each agent is rational. With asymmetric information, the solution concept of competitive equilibrium has been generalized to rational expectations equilibrium. But now common knowledge of market clearing and rationality is required. This paper proves versions of these results in a formal model of knowledge.

Keywords: Rational Expectations, Common Knowledge

JEL Classifications: D5, D8

Working Paper Series

Date posted: December 24, 2001 ; Last revised: February 20, 2002

Suggested Citation

Morris, Stephen Edward, Justifying Rational Expectations (March 1995). CARESS Working Paper No. 95-04. Available at SSRN: http://ssrn.com/abstract=294819 or doi:10.2139/ssrn.294819

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Contact Information

Stephen Edward Morris (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States