MICRO THEORY: Professor Mohammed Ali Khan (Johns Hopkins University)
On Keynesian Beauty Contests with Heterogeneous Agents
The Morris-Shin Keynesian beauty contest assumes agents identically and restrictedly weigh ‘fundamentals’ over ‘mimetic conformity’ using Gaussian signals. We establish the existence and uniqueness of equilibrium rigorously in an extended setting that relaxes the Gaussian requirement and accommodates both idiosyncratic weights and state-dependent noise. By applying the exact law of large numbers (ELLN) and its conditional version (CELLN), our results demonstrate that (i) uniqueness holds without the “bubble” loophole in earlier literature; (ii) Gaussian signals allow a closed-form characterization of equilibrium; (iii) a continuum of linear equilibria emerges when the assumption on conformity fails; and (iv) under state-dependent uncertainty, regime-revealing information structures cleanly decompose the global equilibrium into independent restricted games. These insights generate a methodologically-rich and fecund underpinning to the Morris-Shin-Keynes framework.
Date
Wednesday, 29 April 2026
Time
4pm to 5.30pm
Venue
In-Person Seminar
AS2-03-12 Lim Tay Boh Seminar Room (LTBSR)
AS2-03-12 Lim Tay Boh Seminar Room (LTBSR)