The concept of Rationalizability has been used in the last fifteen years to study stability of equilibria on models with continuum of players such as standard competitive markets, macroeconomic dynamics and currency attacks. However, Rationalizability has been formally defined in a general...

We examine local strong rationality (LSR) in multivariate models with both forward-looking expectations and predetermined variables. Given hypothetical common knowledge restrictions that the dynamics will be close to those of a specified minimal state variable solution, we obtain eductive...

We consider an economic model that features: 1. a continuum of agents 2. an aggregate state of the world over which agents have an infinitesimal influence. We first propose a review, based on work by Jara (2007), of the connections between the eductive viewpoint that puts emphasis on Strongly...

We consider an economic model that features : 1. a continuum of agents 2. an aggregate state of the world over which agents have an infinitesimal influence. We first review the connections between the eductive viewpoint that puts emphasis for example on strongly rational expectations equilibrium...

This paper studies the effect of asymmetric information on equilibrium stability in a class of linear models where the actual state depends on the forecasts about it. Stability is deffined by the so-called eductive criterion which relies on common knowledge of rationality. The main result is...

In a recent paper Ganguli and Yang [2009] demonstrate, that there can exist multiple equilibria in a financial market model á la Grossman and Stiglitz [1980] if traders possess private information regarding the supply of the risky asset. The additional equilibria differ in some important...

We provide conditions for local stability and instability of an equilibrium point in certain systems of nonautonomous nonstochastic difference equations. In the systems under study the influence of time is present through a positive scalar "gain" parameter which converges in the limit to zero....

Most studies of optimal monetary policy under learning rely on optimality conditions derived for the case when agents have rational expectations. In this paper, we derive optimal monetary policy in an economy where the Central Bank knows, and makes active use of, the learning algorithm agents...

We introduce the concept of a Misspecification Equilibrium to dynamic macroeconomics. Agents choose between a list of misspecified econometric models and base their selection on relative forecast performance. A Misspecification Equilibrium is an equilibrium stochastic process in which agents...