Summary
When nominal assets serve to transfer revenues across states of the world, noninformative rational expectations equilibria exist. At noninformative prices, the restricted information under which individuals optimize can be modelled as restricted participation of the individuals in asset markets. When assets are nominal, the indeterminacy of equilibrium prices, and, generically, allocations as well, which characterizes economies with restricted participation guarantees that noninformative equilibrium prices exist.
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This work was supported in part by grant No 26 from the program “Pole d' Attraction Interuniversitaire — Deuxieme phase” of the Belgian government of CORE, Universite' Catholique De Louvain. The second author acknowledges the generous support of the Graduate School of Business of Columbia University. We wish to thank David Cass for very helpful comments.
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Polemarchakis, H.M., Siconolfi, P. Asset markets and the information revealed by prices. Econ Theory 3, 645–661 (1993). https://doi.org/10.1007/BF01210264
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DOI: https://doi.org/10.1007/BF01210264