Now, under homogeneity these expectations of others’ expectations collapsed into single, shared, objectively determined expectations. Under heterogeneity, however, not only is there no objective means by which others’ dividend expectations can be known, but attempts to eliminate the other unknowns, the price expectations, merely lead to the repeated iteration of subjective expectations of subjective expectations (or equivalently, subjective priors on others’ subjective priors)—an infinite regress in subjectivity. Further, this regress may lead to instability: If investor i believes that others believe future prices will increase, he may revise his expectations to expect upward-moving prices. If he believes that others believe a reversion to lower values is.
