Advanced Search
MyIDEAS: Login to save this paper or follow this series

Learning in Infinite Horizon Strategic Market Games with Collateral and Incomplete Information

Contents:

Author Info

  • Sonja Brangewitz

    ()
    (Institute of Mathematical Economics, Bielefeld University)

  • Gael Giraud

    ()
    (Institute of Mathematical Economics, Bielefeld University)

Registered author(s):

    Abstract

    We study a strategic market game with finitely many traders, infinite horizon and real assets. To this standard framework (see, e.g. Giraud and Weyers, 2004) we add two key ingredients: First, default is allowed at equilibrium by means of some collateral requirement for financial assets; second, information among players about the structure of uncertainty is incomplete. We focus on learning equilibria, at the end of which no player has incorrect beliefs - not because those players with heterogeneous beliefs were eliminated from the market (although default is possible at equilibrium) but because they have taken time to update their prior belief. We then prove a partial Folk theorem a la Wiseman (2011) of the following form: For any function that maps each state of the world to a sequence of feasible and sequentially strictly individually rational allocations, and for any degree of precision, there is a perfect Bayesian equilibrium in which patient players learn the realized state with this degree of precision and achieve a payoff close to the one specified for each state.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.imw.uni-bielefeld.de/papers/files/imw-wp-456.pdf
    File Function: First version, 2011
    Download Restriction: no

    Bibliographic Info

    Paper provided by Bielefeld University, Center for Mathematical Economics in its series Working Papers with number 456.

    as in new window
    Length: 49 pages
    Date of creation: Nov 2011
    Date of revision:
    Handle: RePEc:bie:wpaper:456

    Contact details of provider:
    Postal: Postfach 10 01 31, 33501 Bielefeld
    Phone: +49(0)521-106-4907
    Web page: http://www.imw.uni-bielefeld.de/
    More information through EDIRC

    Related research

    Keywords: Strategic Market Games; Infinite Horizon; Incomplete Markets; Collateral; Incomplete Information;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Edward C Prescott & Robert M Townsend, 1997. "General Competitive Analysis in an Economy with Private Information," Levine's Working Paper Archive 1578, David K. Levine.
    2. Arnott, Richard & Stiglitz, Joseph E., 1986. "Moral hazard and optimal commodity taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 29(1), pages 1-24, February.
    3. Thomas Wiseman, 2005. "A Partial Folk Theorem for Games with Unknown Payoff Distributions," Econometrica, Econometric Society, Econometric Society, vol. 73(2), pages 629-645, 03.
    4. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 630-49, November.
    5. Wiseman, Thomas, 2012. "A partial folk theorem for games with private learning," Theoretical Economics, Econometric Society, Econometric Society, vol. 7(2), May.
    6. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, Econometric Society, vol. 47(3), pages 655-78, May.
    7. O'Connell, Stephen A & Zeldes, Stephen P, 1988. "Rational Ponzi Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 431-50, August.
    8. Giraud, Gael, 2003. "Strategic market games: an introduction," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 355-375, July.
    9. Edward C Prescott & Robert M Townsend, 2010. "Pareto Optima and Competitive Equilibria With Adverse Selection and Moral Hazard," Levine's Working Paper Archive 2069, David K. Levine.
    10. Duffie, Darrell & Shafer, Wayne, 1985. "Equilibrium in incomplete markets: I : A basic model of generic existence," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 285-300, June.
    11. Peck, James & Shell, Karl & Spear, Stephen E., 1992. "The market game: existence and structure of equilibrium," Journal of Mathematical Economics, Elsevier, vol. 21(3), pages 271-299.
    12. Dan Cao, 2011. "Collateral Shortages, Asset Price and Investment Volatility with Heterogeneous Beliefs," Working Papers, Georgetown University, Department of Economics gueconwpa~11-11-01, Georgetown University, Department of Economics.
    13. Harker, Patrick T., 1991. "Generalized Nash games and quasi-variational inequalities," European Journal of Operational Research, Elsevier, Elsevier, vol. 54(1), pages 81-94, September.
    14. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 87(3), pages 355-74, August.
    15. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, Elsevier, vol. 9(2), pages 185-202, October.
    16. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(5), pages 937-68, October.
    17. Florenzano, Monique & Gourdel, Pascal, 1993. "Incomplete markets in infinite horizon : debt constraints versus node prices," CEPREMAP Working Papers (Couverture Orange) 9329, CEPREMAP.
    18. Rahi Rohit, 1995. "Optimal Incomplete Markets with Asymmetric Information," Journal of Economic Theory, Elsevier, Elsevier, vol. 65(1), pages 171-197, February.
    19. Aloisio Araujo & M�rio Rui P�scoa & Juan Pablo Torres-Mart�nez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, Econometric Society, vol. 70(4), pages 1613-1638, July.
    20. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, Elsevier, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
    21. Gaël Giraud & Sonia Weyers, 2004. "Strategic market games with a finite horizon and incomplete markets," Economic Theory, Springer, Springer, vol. 23(3), pages 467-491, March.
    22. Dubey, Pradeep & Geanakoplos, John, 2003. "Monetary equilibrium with missing markets," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 585-618, July.
    23. Rabah Amir & Siddhartha Sahi & Martin Shubik, 1986. "A Strategic Market Game with Complete Markets," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 814R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
    24. Weyers, Sonia, 2004. "Convergence to competitive equilibria and elimination of no-trade (in a strategic market game with limit prices)," Journal of Mathematical Economics, Elsevier, vol. 40(8), pages 903-922, December.
    25. Heifetz, Aviad, 2006. "The positive foundation of the common prior assumption," Games and Economic Behavior, Elsevier, Elsevier, vol. 56(1), pages 105-120, July.
    26. Pradeep Dubey & John Geanakoplos, 2003. "Monetary Equilibrium with Missing Markets," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1389, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bie:wpaper:456. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr. Frederik Herzberg).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.