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

DOI10.1007/S00199-014-0855-6MaRDI QIDQ324340zbMATH OpenOpenAlexWikidataFDO

Authors Lei Qiao, Yeneng Sun, Zhixiang Zhang

Publication date 11 October 2016

Published in Economic Theory (Search for Journal in Brave)

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

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)

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.

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Cited in

(7)

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

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