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Existence of an Equilibrium for Lower Semicontinuous Information Acquisition Functions

  • Agnes Bialecki

    (ENS LYON - École normale supérieure de Lyon - École Normale Supérieure (ENS) - Lyon)

  • Eleonore Haguet

    (ENSAE - École Nationale de la Statistique et de l'Administration Économique - ENSAE ParisTech)

  • Gabriel Turinici

    ()

    (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine)

Registered author(s):

    We consider a two-period model in which a continuum of agents trade in a context of costly information acquisition and systematic heterogeneous expectations biases. Because of systematic biases agents are supposed not to learn from others' decisions. In a previous work under somehow strong technical assumptions a market equilibrium was proved to exist and the supply and demand functions were proved to be strictly monotonic with respect to the price. Here we extend these results under very weak technical assumptions. We also prove that the equilibrium price maximizes the trading volume and further additional properties (such as the antimonotonicity of the trading volume with respect to the marginal information price).

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    Paper provided by HAL in its series Post-Print with number hal-00723189.

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    Date of creation: 22 Apr 2014
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    Publication status: Published, Journal of Applied Mathematics, 2014, 2014, 268427
    Handle: RePEc:hal:journl:hal-00723189
    Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00723189
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    1. Stephen Morris, . "Speculative Investor Behavior and Learning," Penn CARESS Working Papers d12f7936881423171f6589501, Penn Economics Department.
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    15. Grossman, Sanford J, 1976. "On the Efficiency of Competitive Stock Markets Where Trades Have Diverse Information," Journal of Finance, American Finance Association, vol. 31(2), pages 573-85, May.
    16. Ko, K. Jeremy & (James) Huang, Zhijian, 2007. "Arrogance can be a virtue: Overconfidence, information acquisition, and market efficiency," Journal of Financial Economics, Elsevier, vol. 84(2), pages 529-560, May.
    17. Pagano, Marco, 1986. "Endogenous Market Thinness and Stock Price Volatility," CEPR Discussion Papers 146, C.E.P.R. Discussion Papers.
    18. Wang, Jiang, 1994. "A Model of Competitive Stock Trading Volume," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 127-68, February.
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