Aggregate Preferred Correspondence and the Existence of a MREE

TL;DR

This paper establishes the continuity and measurability of the aggregate preferred correspondence in a differential information economy, leading to the proof of the existence of a maximin rational expectations equilibrium under standard assumptions.

Contribution

It provides new results on the aggregate preferred correspondence and proves the existence of a maximin REE in a general pure exchange economy with differential information.

Findings

Continuity and measurability of the aggregate preferred correspondence are established.

Existence of a maximin rational expectations equilibrium is proven.

Results apply under standard assumptions on agents' characteristics.

Abstract

In this paper, a general model of a pure exchange differential information economy is studied. In this economic model, the space of states of nature is a complete probability measure space, the space of agents is a measure space with a finite measure, and the commodity space is the Euclidean space. Under appropriate and standard assumptions on agents' characteristics, results on continuity and measurability of the aggregate preferred correspondence in the sense of Aumann in [4] are established. These results together with other techniques are then employed to prove the existence of a maximin rational expectations equilibrium (maximin REE) of the economic model.