Common Knowledge of Rationality and Market Clearing in Economies with Asymmetric Information

Consider an exchange economy with asymmetric information. What is the set of outcomes that are consistent with common knowledge of rationality and market clearing? To address this question we define an epistemic model for the economy that provides a complete description not only of the beliefs of each agent on the relationship between states of nature and prices but also of the whole system of interactive beliefs. The main result, theorem 1, provides a characterization of outcomes that are consistent with common knowledge of rationality and market clearing (henceforth, CKRMC outcomes) in terms of a solution notion - Ex - Post Rationalizability - that is defined directly in terms of the parameters that define the economy. We then apply theorem 1 to characterize the set of CKRMC outcomes in a general class of economies with two commodities. CKRMC manifests several intuitive properties that stand in contrast to the full revelation property of Rational Expectations Equilibrium: In particular, we obtain that for a robust class of economies: (1) there is a continuum of prices that are consistent with CKRMC in every state of nature, and hence these prices do not reveal the true state, (2) the range of CKRMC outcomes is monotonically decreasing as agents become more informed about the economic fundamentals, and (3) trade is consistent with common knowledge of rationality and market clearing even when there is common knowledge that there are no mutual gains from trade.common knowledge, rationality, rationalizability, rationalizable expectations

Disclosure and choice

An agent chooses among projects with random outcomes. His payoff is increasing in the outcome and in an observer's expectation of the outcome. With some probability, the agent can disclose the true outcome to the observer. We show that choice is inefficient: the agent favors riskier projects even with lower expected returns. If information can be disclosed by a challenger who prefers lower beliefs of the observer, the chosen project is excessively risky when the agent has better access to information, excessively risk{averse when the challenger has better access, and efficient otherwise. We also characterize the agent's worst-case equilibrium payoff

Mechanisms with evidence: commitment and robustness

We show that in a class of I‐agent mechanism design problems with evidence, commitment is unnecessary, randomization has no value, and robust incentive compatibility has no cost. In particular, for each agent i, we construct a simple disclosure game between the principal and agent i where the equilibrium strategies of the agents in these disclosure games give their equilibrium strategies in the game corresponding to the mechanism but where the principal is not committed to his response. In this equilibrium, the principal obtains the same payoff as in the optimal mechanism with commitment. As an application, we show that certain costly verification models can be characterized using equilibrium analysis of an associated model of evidence.Accepted manuscrip

Mbd1 is recruited to both methylated and nonmethylated CpGs via distinct DNA binding domains

MBD1 is a vertebrate methyl-CpG binding domain protein (MBD) that can bring about repression of methylated promoter DNA sequences. Like other MBD proteins, MBD1 localizes to nuclear foci that in mice are rich in methyl-CpG. In methyl-CpG-deficient mouse cells, however, Mbd1 remains localized to heterochromatic foci whereas other MBD proteins become dispersed in the nucleus. We find that Mbd1a, a major mouse isoform, contains a CXXC domain (CXXC-3) that binds specifically to nonmethylated CpG, suggesting an explanation for methylation-independent localization. Transfection studies demonstrate that the CXXC-3 domain indeed targets nonmethylated CpG sites in vivo. Repression of nonmethylated reporter genes depends on the CXXC-3 domain, whereas repression of methylated reporters requires the MBD. Our findings indicate that MBD1 can interpret the CpG dinucleotide as a repressive signal in vivo regardless of its methylation status

Radicalizing Democratic Education: Unity and Dissent in Wartime

In the summer of 2002, Israeli students took their final exams toward a high-school diploma. At seventeen or eighteen, just before gaining their voting rights and beginning their military service, the civic studies exam confronted them with the question: “explain why conscientious objection is subversive.” With the stroke of a pen, decades of democratic deliberation on the balance between conscience and compliance, between majority rule and minority dissent, were eradicated. The students were presented with the conclusion, veiling a demand to condemn soldiers who refuse to serve in the occupied territories. At a culminating point of their civic education, they were expected to explain why opposing the decisions of a demo­cratic government, in the context of war, is treacherous

Exit Rights and Entrance Paths: Accommodating Cultural Diversity in a Liberal Democracy

The debate over the accommodation of culture in liberal democracies tends to emphasize exit rights. Autonomy is typically taken as a pre-condition for exit, and public schools are often charged with promoting or facilitating it. I argue that diversity liberals have a more justifiable viewthan that of autonomy liberals on cultural accommodation, but diversity liberalism too should reframe its view of exit rights. Narrow exit rights that protect basic human rights should be maintained and augmented with entrance paths into general society. I further suggest that for exit rights along with entrance paths to provide the morally required conditions for accommodating culture while respecting freedom, policies in this realm should be designed to address adults rather than children. I consider the effect of this dual change of perspective on the accommodation of culture in democratic institutions, including schools

Flying Sandwiches and Broken Glasses. A Response to New Forms of Teacher Education: Connections to Charter Schools and Their Approaches

The authors of the feature article provide a sound analysis of the shortcomings of the new teacher training model in preparing professional teachers rather than technicians, in getting them ready to teach in varied environments, and in helping teachers and students develop their skills of participation in a democratic society. In this response I outline an additional key issue related to apprenticeship-based teacher training models of the type that Match and Relay represent, namely, the matter of accountability

Citizenship in Wartime

When a democracy enters a period of war or overt security threats, its citizens\u27 lives are affected in many ways. Their feel­ings about their country can be transformed; public and political distinctions between us and them shift; citizens\u27 expecta­tions from the government can be revised in light of what they perceive as their most urgent interests. The public agenda often becomes preoccupied with security issues; the public sphere is rearranged around these newly defined focal points. Many is­sues, including immigration, criminal law, demography, free speech, and artistic expression, to name but a few, become part of the security discourse. Access to information about some of these matters is constrained accordingly. These changes can broadly be described as a shift from an open, democratic notion of citizenship to a narrow conception of the relations between state and individual, which I term belligerent citizenship. This chapter will trace some of the basic alterations in the conceptual­ization of citizenship that occur in times of war or conflict, as a basis for constructing a qualified notion of civic education