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Heterogeneous Beliefs and Imperfect Competition in Sequential Auction Markets

Author

Listed:
  • Fabrice Rousseau

    (Department of Economics, Finance and Accounting, National University of Ireland, Maynooth)

  • Hervé Boco

    (Toulouse University, Toulouse Business School, France)

  • Laurent Germain

    (Toulouse University, Toulouse Business School, France)

Abstract

This paper analyzes a multi-auction setting in which informed strategic agents are endowed with heterogeneous noisy signals about the liquidation value of a risky asset. One result is that when the variance of the noise is small the competition between traders takes the form of a rat race during all the periods of trading. As we increase the level of the noise in the traders’ signals, a waiting game phase appears and the intensity of the rat race, observed only at the last auctions, decreases. In sharp contrast with the previous literature, when the variance of the noise is very large, we only observe a waiting game.

Suggested Citation

  • Fabrice Rousseau & Hervé Boco & Laurent Germain, 2015. "Heterogeneous Beliefs and Imperfect Competition in Sequential Auction Markets," Economics Department Working Paper Series n258-15.pdf, Department of Economics, National University of Ireland - Maynooth.
    • Handle: RePEc:may:mayecw:n258-15.pdf
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    efficiency; asymmetric information; noise; liquidity; adverse selection; competition;
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