Rational expectations in urban economics》.pdf

Regional Science and Urban Economics 43 (2013) 197–208 Contents lists available at SciVerse ScienceDirect Regional Science and Urban Economics journal homepage: /locate/regec ☆ Rational expectations in urban economics Marcus Berliant a,⁎, Chia-Ming Yu b, 1 a Department of Economics, Washington University, Campus Box 1208, 1 Brookings Drive, St. Louis, MO 63130-4899, United States b Department of Economics, National Tsing Hua University, No. 101, Section 2, Kuang-Fu Road, Hsinchu 30013, Taiwan, ROC a r t i c l e i n f o a b s t r a c t Article history: Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and Received 15 September 2012 dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper Received in revised form 31 December 2012 shows that the analogous result is not true in urban economies under appropriate modifications for this Accepted 22 January 2013 field. An open subset of economies where none of the modified rational expectations equilibria fully reveals Available online 29 January 2013 private information is found. There are two important pieces. First, there can be information about a location known by a consumer who does not live in that location in equilibrium, and thus the equilibrium ren