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Ambiguity and rational expectations equilibria ∗

By Scott Condie and Jayant Ganguli

Abstract

This paper proves the existence and robustness of partially-revealing rational expectations equilibria (REE) when this equilibrium concept is expanded to allow for some agents to have preferences that display ambiguity aversion. Furthermore, the generic existence of fully- revealing REE is proven for a commonly-used subset of the class of ambiguity averse preferences. This finding illustrates that models with ambiguity aversion provide a relatively tractable framework through which partial information revelation may be studied in a general equilibrium setting without relying on particular distributional assumptions or the presence of noise traders. Constructive examples provide further insight into the properties of these equilibria

Year: 2007
OAI identifier: oai:CiteSeerX.psu:10.1.1.352.1849
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