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Information-based trade

  • Bond, Philip
  • Eraslan, Hülya

We study the possibility of trade for purely informational reasons. We depart from previous analyses (e.g. Grossman and Stiglitz (1980) [22] and Milgrom and Stokey (1982) [32]) by allowing the final payoff of the asset being traded to depend on an action taken by its eventual owner. We characterize conditions under which equilibria with trade exist.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 5 (September)
Pages: 1675-1703

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:5:p:1675-1703
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Lawrence R. Glosten & Paul R. Milgrom, 1983. "Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders," Discussion Papers 570, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Matthew O. Jackson & James Peck, 1997. "Asymmetric Information in a Competitive Market Game: Reexamining the Implications of Rational Expectations," Microeconomics 9711004, EconWPA.
  3. Rubinstein, Ariel & Wolinsky, Asher, 1990. "On the logic of "agreeing to disagree" type results," Journal of Economic Theory, Elsevier, vol. 51(1), pages 184-193, June.
  4. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
  5. Raymond Deneckere & Meng-Yu Liang, 2006. "Bargaining with Interdependent Values," Econometrica, Econometric Society, vol. 74(5), pages 1309-1364, 09.
  6. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  7. Urs Schweizer, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 163-177.
  8. James Dow & Gary Gorton, 1994. "Noise Trading, Delegated Portfolio Management, and Economic Welfare," NBER Working Papers 4858, National Bureau of Economic Research, Inc.
  9. Dow James & Gorton Gary, 1995. "Profitable Informed Trading in a Simple General Equilibrium Model of Asset Pricing," Journal of Economic Theory, Elsevier, vol. 67(2), pages 327-369, December.
  10. Dow, J & Rahi, R, 1997. "Informed Trading, Investment, and Welfare," Economics Working Papers eco97/03, European University Institute.
  11. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
  12. Urs Schweizer, 1989. "Litigation and Settlement under Two-Sided Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 163-177.
  13. James Dow & Itay Goldstein & Alexander Guembel, 2005. "Commitment to Overinvest and Price Informativeness," OFRC Working Papers Series 2005fe18, Oxford Financial Research Centre.
  14. Philip Bond & Itay Goldstein & Edward Simpson Prescott, 2010. "Market-Based Corrective Actions," Review of Financial Studies, Society for Financial Studies, vol. 23(2), pages 781-820, February.
  15. Vishny, Robert W. & Bhagat, Sanjai & Shleifer, Andrei, 1990. "Hostile Takeovers in the 1980s: The Return to Corporate Specialization," Scholarly Articles 8705861, Harvard University Department of Economics.
  16. Daniel R. Vincent, 1988. "Bargaining with Common Values," Discussion Papers 775, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Robert Evans, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Oxford University Press, vol. 56(4), pages 499-510.
  18. Jiang Wang, 1993. "A Model of Intertemporal Asset Prices Under Asymmetric Information," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 249-282.
  19. Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  20. Bruno Biais & Peter Bossaerts, 1998. "Asset Prices and Trading Volume in a Beauty Contest," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 307-340.
  21. repec:oup:restud:v:75:y:2008:i:1:p:133-164 is not listed on IDEAS
  22. Jiang Wang, 1993. "A Model of Intertemporal Asset Prices Under Asymmetric Information," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 249-282.
  23. Art Durnev & Randall Morck & Bernard Yeung, 2004. "Value-Enhancing Capital Budgeting and Firm-specific Stock Return Variation," Journal of Finance, American Finance Association, vol. 59(1), pages 65-105, 02.
  24. Kreps, David M., 1977. "A note on "fulfilled expectations" equilibria," Journal of Economic Theory, Elsevier, vol. 14(1), pages 32-43, February.
  25. Nielsen, Lars Tyge, 1995. "Common Knowledge of a Multivariate Aggregate Statistic," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 207-16, February.
  26. Robert Evans, 1989. "Sequential Bargaining with Correlated Values," Review of Economic Studies, Oxford University Press, vol. 56(4), pages 499-510.
  27. Foster, F Douglas & Viswanathan, S, 1996. " Strategic Trading When Agents Forecast the Forecasts of Others," Journal of Finance, American Finance Association, vol. 51(4), pages 1437-78, September.
  28. José M. Marín & Rohit Rahi, 1996. "Information revelation and market incompleteness," Economics Working Papers 145, Department of Economics and Business, Universitat Pompeu Fabra.
  29. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September.
  30. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  31. Halevy, Yoram, 2004. "The possibility of speculative trade between dynamically consistent agents," Games and Economic Behavior, Elsevier, vol. 46(1), pages 189-198, January.
  32. Beth Allen & James S. Jordan, 1998. "The existence of rational expectations equilibrium: a retrospective," Staff Report 252, Federal Reserve Bank of Minneapolis.
  33. Avanidhar Subrahmanyam & Sheridan Titman, 1999. "The Going-Public Decision and the Development of Financial Markets," Journal of Finance, American Finance Association, vol. 54(3), pages 1045-1082, 06.
  34. Morris, Stephen, 1994. "Trade with Heterogeneous Prior Beliefs and Asymmetric Information," Econometrica, Econometric Society, vol. 62(6), pages 1327-47, November.
  35. Drew Fudenberg & David K Levine, 2005. "Learning and Belief-Based Trade," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 42(126), pages 199-208.
  36. Dasgupta, Amil & Prat, Andrea, 2008. "Information aggregation in financial markets with career concerns," Journal of Economic Theory, Elsevier, vol. 143(1), pages 83-113, November.
  37. Lawrence Blume & Tarek Coury & David Easley, 2006. "Information, trade and incomplete markets," Economic Theory, Springer, vol. 29(2), pages 379-394, October.
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