On the uniqueness of fully informative rational expectations equilibria

This paper analyzes two equivalent equilibrium notions under asymmetric inf ormation: risk neutral rational expectations equilibria (rn-REE), and commo n knowledge equilibria. We show that the set of fully informative rn-REE is a singleton, and we provide necessary and sufficient conditions for the ex istence of partially informative m-REE. In a companion paper (DeMarzo and S kiadas (1996)) we show that equilibrium prices for the larger class of quas i-complete economies can be characterized as rn-REE. Examples of quasi-comp lete economies include the type of economies for which demand aggregation i n the sense of German is possible (with or without asymmetric information), the setting of the Milgrom and Stokey no-trade theorem, an economy giving rise to the CAPM with asymmetric information but no normality assumptions, the simple exponential-normal model of Grossman (1976), and a case of no ag gregate endowment risk. In the common-knowledge context, we provide necessa ry and sufficient conditions for a common knowledge posterior estimate, giv en common priors, to coincide with the full communication posterior estimat e.