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Asset market equilibrium with short-selling and differential information

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  • Daher, Wassim
  • Martins-da-Rocha, Victor-Filipe
  • Vailakis, Yiannis

Abstract

We introduce differential information in the asset market model studied by Cheng (1991), Dana and Le Van (1996) and Le Van and Truong Xuan (2001). An equilibrium existence result is proven assuming that the economy's information structure satisfies the conditional independency property. If private information is not publicly verifiable, agents have incentives to misreport their types and therefore contracts may not be executed in the second period. We also show that under the conditional independence property equilibrium contracts are always executable.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/2967.

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Date of creation: Sep 2007
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Publication status: Published in Economic Theory, 2007, Vol. 32, no. 3. pp. 425-446.Length: 21 pages
Handle: RePEc:dau:papers:123456789/2967

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Related research

Keywords: Competitive Equilibrium; Differential Information; Asset Market; Equilibre concurrentiel; Information asymétrique; Marché d'actifs;

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References

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Cited by:
  1. Daher, Wassim & Martins-da-Rocha, Victor-Filipe & Vailakis, Yiannis, 2007. "Asset market equilibrium with short-selling and differential information," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/2967, Paris Dauphine University.
  2. Carlos Hervés-Beloso & V. Martins-da-Rocha & Paulo Monteiro, 2009. "Equilibrium theory with asymmetric information and infinitely many states," Economic Theory, Springer, Springer, vol. 38(2), pages 295-320, February.
  3. Marta Faias & Carlos Hervés-Beloso & Emma Moreno-García, 2011. "Equilibrium price formation in markets with differentially informed agents," Economic Theory, Springer, Springer, vol. 48(1), pages 205-218, September.
  4. Guadalupe Fugarolas-Alvarez-Ude & Carlos Hervés-Beloso & Emma Moreno-García & Juan Torres-Martínez, 2009. "A market game approach to differential information economies," Economic Theory, Springer, Springer, vol. 38(2), pages 321-330, February.
  5. Laura Angeloni & V. Martins-da-Rocha, 2009. "Large economies with differential information and without free disposal," Economic Theory, Springer, Springer, vol. 38(2), pages 263-286, February.
  6. João Correia-da-Silva & Carlos Hervés-Beloso, 2009. "Prudent expectations equilibrium in economies with uncertain delivery," Economic Theory, Springer, Springer, vol. 39(1), pages 67-92, April.
  7. Angeloni, Laura & Martins-da-Rocha, Victor-Filipe, 2009. "Large economies with differential information and without free disposal," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/2344, Paris Dauphine University.
  8. João Correia da Silva, 2014. "Two-period economies with price-contingent deliveries," FEP Working Papers 529, Universidade do Porto, Faculdade de Economia do Porto.
  9. Raad, R., 2012. "Existence of an equilibrium for infinite horizon economies with and without complete information," Journal of Mathematical Economics, Elsevier, vol. 48(4), pages 247-262.
  10. Angeloni, Laura & Martins-da-Rocha, Victor Filipe, 2007. "Contract enforcement and incentive compatibility in large economies with differential information: the role of exact feasibility," Economics Working Papers (Ensaios Economicos da EPGE) 647, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  11. Martins-da-Rocha, Victor Filipe & Angeloni, Laura, 2008. "Large economies with differential information but without free disposal," Economics Working Papers (Ensaios Economicos da EPGE) 671, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  12. Marialaura Pesce, 2010. "On mixed markets with asymmetric information," Economic Theory, Springer, Springer, vol. 45(1), pages 23-53, October.

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