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Investor´s Distrust and the Marketing of New Financial Assets

Author

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  • Enrique L. Kawamura

    (Department of Economics, Universidad de San Andres)

Abstract

In this paper I present a model where a financial intermediary decides to open new security markets and offer them to boundedly rational investors. I show first that, if consumers have downward biased priors about payoffs, then no trade in the new securities may be verified. It is shown that no endogenous variable serves as a credible signal. Hence, only exogenous signals allows inference by investors. Incentives to disclosure depend upon its cost. I analyze this last issue with two-part tariff schemes.

Suggested Citation

  • Enrique L. Kawamura, 2000. "Investor´s Distrust and the Marketing of New Financial Assets," Working Papers 23, Universidad de San Andres, Departamento de Economia, revised Apr 2004.
    • Handle: RePEc:sad:wpaper:23
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    Cited by:

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    2. Roberto Cortes Conde, 2008. "Spanish America Colonial Patterns: The Rio de La Plata," Working Papers 96, Universidad de San Andres, Departamento de Economia, revised Mar 2008.

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    Keywords

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    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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