Investor´s Distrust and the Marketing of New Financial Assets
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.
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|Date of creation:||Mar 2000|
|Date of revision:||Apr 2004|
|Publication status:||Published in Quarterly Review of Economics and Finance, April 2004, Volume 44, pages 265-295|
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