The Structure of Equilibrium in an Asset Market with Variable Supply
AbstractWe characterize the structure of Nash equilibria in asset market games with variable asset supply. In equilibrium, di®erent assets have dif- ferent returns, and (risk neutral) investors with di®erent wealth hold portfolios with di®erent structures. In equilibrium, an asset's return is inversely related to the elasticity of its supply. The larger an in- vestor, the more diversi¯ed is his portfolio. Smaller investors do not hold all the assets, but achieve higher percentage returns. More gen- erally, our results can be applied also to other \multi-market games" in which several players compete in several arenas simultaneously, like multi-market Cournot oligopolies, or multiple rent-seeking games.
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Bibliographic InfoPaper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0804.
Date of creation: Jun 2008
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Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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"The Asset Market Game,"
Vienna Economics Papers
0320, University of Vienna, Department of Economics.
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