Difference(s) between Rational Expectations Equilibrium and Nash equilibium What is the major difference between the notion of rational expectations equilibrium and Nash equilibium? And why do we, only, have a rational expectation about the first moment (the price) in the former one? Do they coincide or they constitute a completely different framework? They seem so similar to me in some articles, that I can not distinguish their features if they are any!
Hi: They are pretty close to completely different. I don't know the least thing about game theory but a nash equilibrium describes what happens in a game when two or more people have a certain type of expectation. RE is one type of expectation but if you google for RE you'll see that it's a field in itself. It happens to have an application in game theory but it's a seperate field developed by macro-economists in the early 70's. RE founder could be viewed as Lucas or John Muth depending on who you ask. Muth came up with the concept in 1961. Lucas applied it to macro-economics in the early 70's and it took off from there.