An Introduction to the Theory of Rational Expectations Under Asymmetric Information

Every good economics textbook contains the cliche that market prices provide signals which facilitate the allocation of resources to their best use. In a world not subject to random shocks, consumers and producers when faced with competitive prices need look no further than their own preferences or production technology to be able to make a decision. They need give no thought to the tastes, endowments or technology of other agents. However, in a...