Beauty contests under private information and diverse beliefs: How different?

Kurz, Mordecai

doi:10.1016/j.jmateco.2006.08.001

Cited by 26 publications

(12 citation statements)

References 38 publications

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“…The achievement of the RB literature (e.g. Kurz 1974Kurz , 1994Kurz , 2008Kurz , 2009Kurz and Beltratti 1997;Motolese 2001, 2011;Kurz et al 2005a,b;Kurz and Wu 1996;Motolese 2001Motolese , 2003Nielsen 1996Nielsen , 2003Nielsen , 2011Guo 2003, 2004;Guo et al 2011) is the development of a consistent General Equilibrium theory with diverse beliefs where individual beliefs about exogenous shocks (hence market belief) have independent dynamics, on par with the dynamics of"fundamental" exogenous shocks. This literature assumes the economy is a non-stationary process and it is this complexity that leads to belief diversity.…”

Section: The Impact Of Diverse Beliefs: a Brief Summary Of Results Inmentioning

confidence: 99%

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Symposium: on the role of market belief in economic dynamics, an introduction

Kurz

2010

Econ Theory

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entitled "When Are Diverse Beliefs Central?" They reflect the rapidly growing literature on the impact of diverse beliefs. It may thus be helpful to the reader if I use this introduction to highlight some ideas of this literature as reflected in the papers of this volume.As the era of Rational Expectations (in short RE) comes to a close it is important to clarify two points. First, the success of RE in disciplining macroeconomic modeling should not obscure the fact that the term "rational" is merely a label. Rationality of actions and rationality of beliefs have little to do with each other and using the term "rational" in RE has tended to brand other beliefs as "irrational." Studying axioms of belief rationality is actually a fruitful area of research that can fill the wide open space between RE and true irrational beliefs.A second point relates to private information. Not wishing to contradict RE, many adopted the device of asymmetric private information as the "cause" of diverse beliefs. Indeed, some view diverse beliefs as equivalent to asymmetric information. This is theoretically and empirically the wrong solution and in Kurz (2008Kurz ( , 2009) I explain why. It suffices to say that in large markets behavior under private information is different from behavior under diverse beliefs with common information. Also, all empirical evidence associates diverse forecasts with diverse modeling or diverse interpretation of public information. Finally, due to stochastic independence of private information over agents and time, RE models with asymmetric private information fail to deliver the key dynamic properties that are the central implications of I thank George Evans, Carsten Nielsen, Volker Wieland and Mike Wolters for constructive comments on earlier drafts of this Introduction.

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Section: The Impact Of Diverse Beliefs: a Brief Summary Of Results Inmentioning

confidence: 99%

“…Indeed, some view diverse beliefs as equivalent to asymmetric information. This is theoretically and empirically the wrong solution and in Kurz (2008Kurz ( , 2009) I explain why. It suffices to say that in large markets behavior under private information is different from behavior under diverse beliefs with common information.…”

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confidence: 98%

Symposium: on the role of market belief in economic dynamics, an introduction

Kurz

2010

Econ Theory

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“…For k = 0, the claim follows from (11) and (12). Suppose that the claim holds for k 1 and that t i 2 T i satis…es…”

Section: Proposition 13mentioning

confidence: 92%

Common Belief Foundations of Global Games

2015

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“…We emphasize that this structure is necessary for the aggregate expectations operator to satisfy LIE, and is thus necessary for an aggregation result. There is a wide literature that studies the implications of higherorder beliefs: Townsend (1983) finds that incorporating the way in which agents forecast the forecasts of other agents may have interesting dynamic implications; for the incorporation of higher-order beliefs into monetary models, see , Amato and Shin (2006), and Kurz (2008). Higher-order beliefs may be important in some settings and its consequence for economic dynamics is a topic warrant further study.…”

Section: Heterogeneous Expectations: Axiomsmentioning

confidence: 99%