Do markets favor agents able to make accurate predictions?

Blume and Easley (1992) show that if agents' have the same savings rule, th ose who maximize the expected logarithm of next period's outcomes will even tually hold all wealth (i.e, are "most prosperous"). However, if no agent a dopts this rule then the most prosperous are not necessarily those who make the most accurate predictions. Thus, agents who make inaccurate prediction s need not be driven out of the market. In this paper, it is shown that, am ong agents who have the same intertemporal discount factor land who choose savings endogenously), the most prosperous are those who make accurate pred ictions. Hence, convergence to rational expectations obtains because agents who make inaccurate predictions are driven out of the market.