THE REVELATION OF INFORMATION AND SELF-FULFILLING BELIEFS

At a Rational Expectations Equilibrium (REE), individuals are assumed to know the map from states to prices. This hypothesis has two compone nts, that agents agree (consensus) and that they have point expectatio ns (degeneracy). We consider economies where agents' beliefs are descr ibed by a joint distribution on states and prices, and these beliefs a re fulfilled at equilibrium. Beliefs are self-fulfilling if every pric e in the support of the distribution is an equilibrium price. The corr esponding equilibria are Beliefs Equilibria (BE). The further restrict ion that agents have the same beliefs results in Common Beliefs Equili bria (CBE). We study the relationship between BE, CBE, and REE, thus i solating the role of consensus and of degeneracy in achieving rational expectations. (C) 1997 Academic Press.