TY - JOUR
T1 - Toward a strategic foundation for rational expectations equilibrium
AU - Reny, Philip J.
AU - Perry, Motty
PY - 2006/9
Y1 - 2006/9
N2 - A step toward a strategic foundation for rational expectations equilibrium is taken by considering a double auction with n buyers and m sellers with interdependent values and affiliated private information. If there are sufficiently many buyers and sellers, and their bids are restricted to a sufficiently fine discrete set of prices, then, generically, there is an equilibrium in nondecreasing bidding functions that is arbitrarily close to the unique fully revealing rational expectations equilibrium of the limit market with unrestricted bids and a continuum of agents. In particular, the large double-auction equilibrium is almost efficient and almost fully aggregates the agents' information.
AB - A step toward a strategic foundation for rational expectations equilibrium is taken by considering a double auction with n buyers and m sellers with interdependent values and affiliated private information. If there are sufficiently many buyers and sellers, and their bids are restricted to a sufficiently fine discrete set of prices, then, generically, there is an equilibrium in nondecreasing bidding functions that is arbitrarily close to the unique fully revealing rational expectations equilibrium of the limit market with unrestricted bids and a continuum of agents. In particular, the large double-auction equilibrium is almost efficient and almost fully aggregates the agents' information.
KW - Double auction
KW - Equilibrium existence
KW - Information aggregation
KW - Monotone pure strategy
KW - Rational expectations
UR - http://www.scopus.com/inward/record.url?scp=33748506271&partnerID=8YFLogxK
U2 - 10.1111/j.1468-0262.2006.00703.x
DO - 10.1111/j.1468-0262.2006.00703.x
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AN - SCOPUS:33748506271
SN - 0012-9682
VL - 74
SP - 1231
EP - 1269
JO - Econometrica
JF - Econometrica
IS - 5
ER -