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This paper provides micro-foundations for independent random matching of a large population , as widely used in the economics literature. We consider both static and dynamic systems with random mutation, partial matching arising from search, and type changes induced by matching. Under independence assumptions at each randomization step, we show that there… (More)

Many economic models include random shocks imposed on a large number (continuum) of economic agents with individual risk. In this context, an exact law of large numbers and its converse is presented in [23] to characterize the cancelation of individual risk via aggregation. However, it is well known that the Lebesgue unit interval is not suitable for… (More)

The Loeb space construction in nonstandard analysis is applied to the theory of processes to reveal basic phenomena which cannot be treated using classical methods. An asymptotic interpretation of results established here shows that for a triangular array (or a sequence) of random variables, asymptotic uncorrelatedness or asymptotic pairwise independence is… (More)

The idea of perfect competition for an economy with asymmetric information is formalized via an id-iosyncratic signal process in which the private signals of almost every individual agent can influence only a negligible group of agents, and the individual agents' relevant signals are essentially pairwise independent conditioned on the true states of nature.… (More)

We present a comprehensive theory of large games in which players have names and determinate social-types and/or biological traits, and identify through four decisive examples, essentially based on a matching-pennies type game, pathologies arising from the use of a Lebesgue interval for player's names. In a sufficiently general context of traits and… (More)

We present a version of the APT based on an asset index set of an arbitrary infinite cardinality. show that, in the absence of gains from asymptotic arbitrage, the square of the deviations of the individual rates of return from a factor-pricing formula sum to a finite number and that this absence, while sufficient, is not necessary for the formula to hold.… (More)

The rational expectations equilibrium (REE), as introduced in Radner (1979) in a general equilibrium settingà la Arrow-Debreu-Mckenzie, often fails to have normative properties such as universal existence, incentive compatibility and efficiency. We resolve those problems by providing a new model which makes the standard REE a desirable solution concept. In… (More)