Mon, 02 Feb 2026
15:30
L3

Mean field games without rational expectations

Benjamin MOLL
(LSE)
Abstract
Mean Field Game (MFG) models implicitly assume “rational expectations”, meaning that the heterogeneous agents being modeled correctly know all relevant transition probabilities for the complex system they inhabit. When there is common noise, it becomes necessary to solve the “Master equation” (a.k.a. “Monster equation”), a Hamilton-JacobiBellman equation in which the infinite-dimensional density of agents is a state variable. The rational expectations assumption and the implication that agents solve Master equations is unrealistic in many applications. We show how to instead formulate MFGs with non-rational expectations. Departing from rational expectations is particularly relevant in “MFGs with a low-dimensional coupling”, i.e. MFGs in which agents’ running reward function depends on the density only through low-dimensional functionals of this density. This happens, for example, in most macroeconomics MFGs in which these lowdimensional functionals have the interpretation of “equilibrium prices.” In MFGs with a low-dimensional coupling, departing from rational expectations allows for completely sidestepping the Master equation and for instead solving much simpler finite-dimensional HJB equations. We introduce an adaptive learning model as a particular example of nonrational expectations and discuss its properties.

Prelims Corner is back for Michaelmas 2025! 

We will be running Prelims Corner from 11am-12pm on Mondays outside L1 from Weeks 2-8. This is the perfect opportunity to receive support from an experienced DPhil student about particularly tricky maths problems, or just to meet and work with other Prelims students. Registration isn't required, so feel free to drop in and out as you need. Free snacks are provided! 

Fri, 24 Oct 2025
12:00
Quillen Room N3.12
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