Morris and Shin.

• Position: Economists - Brief Article

Morris and Shin investigate whether beliefs are as indeterminate as models with multiple equilibriums suggest. Multiple equilibriums may be the unintended consequence of two modelling assumptions: that fundamentals are commonly known, and that economic agents know others' actions in equilibrium. Both assumptions are questionable. When others' actions are not known with certainty, for example, when these actions rely on noisy signals, then self-fulfilling beliefs lead to a unique outcome...