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Strategic market games with interim price information

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  • Alexander Zimper

Abstract

Is it possible to incorporate the rational expectations concept of interim price information from competitive equilibrium models into simultaneous move games? In addressing consistency and measurability issues that arise from the "chicken-egg" problem of rational expectations, strategic market games with interim price information do exactly that. In these non-Bayesian games informed traders simultaneously submit their linear demand-schedules to a Walrasian auctioneer after they have observed their private signals and their interim price information. I show that a specific class of Bayesian Nash equilibria from Bayesian market games (Kyle 1989; Vives 2011) carries over to 'become' Nash equilibria of strategic market games with interim price information. I also show that conditioning on interim price information may give rise to Nash equilibria that support price-collusion between informed traders against a liquidity trader (e.g., the government in a procurement situation).

Suggested Citation

  • Alexander Zimper, 2025. "Strategic market games with interim price information," ERSA Working Paper Series, Economic Research Southern Africa, vol. 0.
    • Handle: RePEc:rza:ersawp:v::y:2025:i::id:205
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