We study a model where investment decisions are based on investors’ information about the unknown and endogenous return of the investment. The information of investors consists of endogenously determined messages sold by financial analysts who have access to both public and private information on the return of the investment. We assume that the return of the investment is correlated with the aggregate investment. This results into a beauty contest among analysts (or a "conformism" effect). In equilibrium, analysts sell all the information they have to all the investors. A striking result is that there are sometimes multiple equilibria. There are equilibria where the beauty contest is exacerbated. Because of the correlation across analysts' information sources, not all the information available in the economy is transmitted to investors.

We study the relationship between default and the maturity structure of the debt portfolio of a Sovereign, under uncertainty. The Sovereign faces a trade-off between a future costly default and a high current fiscal effort. This results into a debt crisis in case a large initial issuance of long term debt is followed by a sequence of negative macro shocks. Prior uncertainty about future fundamentals is then a source of default through its effect on long term interest rates and the optimal debt issuance. Intuitively, the Sovereign chooses a portfolio implying a risk of default because this risk generates a correlation between the future value of long term debt and future fundamentals. Long term debt serves as a hedging instrument against the risk on fundamentals. When expected fundamentals are high, the Sovereign issues a large amount of long term debt, the expected default probability increases, and so does the long term interest rate.

The eductive approach consists of finding solutions consistent with common knowledge of individual rationality and the model. An equilibrium is stable whenever it is the unique outcome consistent with these assumptions. This is a strong stability criterion as it relies on no assumption of prior knowledge of others' expectations. This review presents various (in)stability results. It focuses on the following method: Rewrite the model as a temporary equilibrium map in which the current economic outcome is determined by expectations and characterize stability by contracting properties of this map. The main insight suggested by these results is due to Guesnerie (2002): Stability is obtained when the actual outcome is not very sensitive to expectations. Additional insights include that agents' heterogeneity is a source of instability; the ability of prices to transmit information is limited by the quality of private information; and coordination when agents are infinitely lived is difficult because of the large effect of long-run expectations.