No Speculation in Rational Expectations under Generalized Information

Abstract

Let us consider a pure exchange economy under non-partitional information where the traders are assumed to have a reflexive and transitive information structure and to have strictly monotone preferences. We show the no speculation theorem: If the initial endowment is ex-ante Pareto optimal then there exists no other rational expectations equilibrium for any price with respect to which all traders are rational about expectations everywhere.Pure exchange economy with knowledge, No speculation, Rational expectations equilibrium, Ex-ante Pareto optimum