Rational Expectations Equilibria in Dynamic Economies with Interacting Agents∗

We consider general economies in which rational agents interact locally. The local aspect of the interactions is designed to capture in a simple abstract way social interactions, that is, socio-economic environments in which markets do not mediate all of agents ’ choices, and each agent’s choice might be in part determined, for instance, by family, peer group, or ethnic group effects. We study static as well as dynamic infinite horizon economies; we allow for economies with incomplete information, and we consider jointly global and local interactions, to integrate e.g., markets and global externalities with peer and group effects. We provide conditions under which such economies have equilibria with rational expectations which depend in a Lipschitz continuous manner on the parameters. Journal of Economi