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The acquisition of information in a dynamic market (*)

Author

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  • Jonathan B. Berk

    (School of Business Administration, University of Washington, Box 353200, Seattle, WA 981953200, USA)

Abstract

This paper models the information acquisition process in an intertemporal rational expectations framework. It demonstrates that equilibria do not generally exist in intertemporal economies in which agents are assumed to know the state-contingent price path and the information acquisition process is endogenous. In addition, an example of a fully revealing equilibrium in which agents pay a strictly positive amount for information is provided. Finally, we also show that it is possible for an equilibrium to exist in which agents choose to purchase information even if all agents, including the agents who purchased the information, are made strictly worse off by the purchase.

Suggested Citation

  • Jonathan B. Berk, 1997. "The acquisition of information in a dynamic market (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(3), pages 441-451.
    • Handle: RePEc:spr:joecth:v:9:y:1997:i:3:p:441-451
    Note: Received: December 9, 1994 revised version December 1, 1995
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    Cited by:

    1. Bond, Philip & Eraslan, Hülya, 2010. "Information-based trade," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1675-1703, September.
    2. Juan Hatchondo, 2004. "The value of information with heterogeneous agents and partially revealing prices," Econometric Society 2004 North American Summer Meetings 175, Econometric Society.
    3. Emanuela Sciubba, 2005. "Asymmetric information and survival in financial markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(2), pages 353-379, February.

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