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Repeated market games with lack of information on both sides

Author

Listed:
  • Bernard De Meyer

    (CERMSEM)

  • Alexandre Marino

    (CERMSEM)

Abstract

De Meyer and Moussa Saley explains endogenously the appearance of Brownian Motion in finance by modelling the strategic interaction between two asymmetrically informed market makers with a zero-sum repeated game with One-sided information. In this paper, we generalize this model to a setting of a bilateral asymmetry of information. This new model leads us to the analyze of a repeated zero sum game with lack of information on both sides. In De Meyer and Moussa Saley's analysis, the appearance of the normal distribution in the asymptotic behaviour of Vn(P)/Vn is the crucial point of the appearance of the B.M. In the context of bilateral asymmetry of information, the same analysis provides naturally the B.M as a limit of random walks. This allows us to describe the limit of Vn(P,Q)/Vn as the value of a associated «Brownian game», similar to those introduced by De Meyer. Furthermore, the value of this «Brownian game» allows us to consider the limit of Vn(P,Q)Vn as the solution of a heuristic partial differential equation

Suggested Citation

  • Bernard De Meyer & Alexandre Marino, 2004. "Repeated market games with lack of information on both sides," Cahiers de la Maison des Sciences Economiques bla04066, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:bla04066
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    Cited by:

    1. Bernard de Meyer & Alexandre Marino, 2005. "Duality and optimal strategies in the finitely repeated zero-sum games with incomplete information on both sides," Post-Print halshs-00193996, HAL.
    2. Fedor Sandomirskiy, 2018. "On Repeated Zero-Sum Games with Incomplete Information and Asymptotically Bounded Values," Dynamic Games and Applications, Springer, vol. 8(1), pages 180-198, March.
    3. Bernard de Meyer & Alexandre Marino, 2005. "Duality and optimal strategies in the finitely repeated zero-sum games with incomplete information on both sides," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00193996, HAL.

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