Conditional exact law of large numbers and asymmetric information economies with aggregate uncertainty

DOI10.1007/S00199-014-0855-6zbMATH Open1367.91103arXiv1410.1147OpenAlexW2592428557WikidataQ114231193 ScholiaQ114231193MaRDI QIDQ324340FDOQ324340

Authors: Lei Qiao, Yeneng Sun, Zhixiang Zhang 

Publication date: 11 October 2016

Published in: Economic Theory (Search for Journal in Brave)

Abstract: A stochastic model with a continuum of economic agents often involves shocks at both macro and micro levels. This can be formalized by a continuum of random variables that are conditionally independent given the macro level shocks. Based on the framework of a Fubini extension, the results on the exact law of large numbers and its converse for a con- tinuum of independent random variables in [14] are extended to the setting with conditional independence given general macro states. As an illustrative application, it is shown that any ex ante efficient allocation in an asymmetric information economy with general aggre- gate uncertainty has a (utility) equivalent allocation that is incentive compatible, which generalizes the corresponding results in [15] to the case with infinitely many states.

Full work available at URL: https://arxiv.org/abs/1410.1147

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zbMATH Keywords

conditional independenceasymmetric informationincentive compatibilityconditional exact law of large numbersex ante efficiencyFubini extension

Mathematics Subject Classification ID

Strong limit theorems (60F15) Economics of information (91B44) Stochastic models in economics (91B70)

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Cited In (7)

• Conditional expectation of correspondences and economic applications
• The one-way Fubini property and conditional independence: an equivalence result
• Efficient allocations in economies with asymmetric information when the realized frequency of types is common knowledge
• Liquidity Based Modeling of Asset Price Bubbles via Random Matching
• Monte Carlo simulation of macroeconomic risk with a continuum of agents: the general case
• Aggregation and the law of large numbers in large economies
• A Mean Field Game of Optimal Stopping

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