Information Dispersion and Equilibrium Multiplicity
This paper studies the implications of correlation of private signals about the liquidation value of a risky asset in a variation of a standard noisy rational expectations model in which traders receive endowment shocks which are private information and have a common component. We …nd that a necessary condition to generate multiple linear partially revealing rational expectations equilibria is the existence of several sources of information dispersion. In this context equilibrium multiplicity tends to occur when information is more dispersed. A necessary condition to have strategic complementarity in information acquisition is to have mul- tiple equilibria. When the equilibrium is unique there is strategic substi- tutability in information acquisition, corroborating the result obtained in Grossman and Stiglitz (1980). JEL Classi…cation: D82, D83, G14 Keywords: Multiplicity of equilibria, strategic complementarity, asym- metric information.
|Date of creation:||2009|
|Contact details of provider:|| Postal: Avda. de la Universitat,1 - 43204 Reus (Tarragona)|
Phone: 977 75 98 00
Fax: 977 75 98 10
Web page: http://www.urv.cat
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Danthine, Jean-Pierre & Moresi, Serge, 1993.
"Volatility, information and noise trading,"
European Economic Review,
Elsevier, vol. 37(5), pages 961-982, June.
- Jean-Pierre Danthine & Serge Moresi, 1990. "Volatility, Information and Noise Trading," CEPR Financial Markets Paper 0010, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
- Jean-Pierre DANTHINE & Serge MORESI, 1990. "Volatility, Information, and Noise Trading," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9015, Université de Lausanne, Faculté des HEC, DEEP.
- Jayant Vivek Ganguli & Liyan Yang, 2009. "Complementarities, Multiplicity, and Supply Information," Journal of the European Economic Association, MIT Press, vol. 7(1), pages 90-115, 03.
- Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
- Christian Hellwig & Laura Veldkamp, 2009. "Knowing What Others Know: Coordination Motives in Information Acquisition," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 223-251.
- Laura Veldkamp & Christian Hellwig, 2006. "Knowing What Others Know: Coordination Motives in Information Acquisition," Working Papers 06-14, New York University, Leonard N. Stern School of Business, Department of Economics.
- Hellwig, Christian & Veldkamp, Laura, 2007. "Knowing What Others Know: Coordination Motives in Information Acquisition," CEPR Discussion Papers 6506, C.E.P.R. Discussion Papers.
- Christian Hellwig & Laura Veldkamp, 2006. "Knowing what others Know: Coordination motives in information acquisition," 2006 Meeting Papers 361, Society for Economic Dynamics.
- Diamond, Douglas W. & Verrecchia, Robert E., 1981. "Information aggregation in a noisy rational expectations economy," Journal of Financial Economics, Elsevier, vol. 9(3), pages 221-235, September.
- Maik Heinemann, 2009. "Stability under Learning of Equilibria in Financial Markets with Supply Information," Working Paper Series in Economics 122, University of Lüneburg, Institute of Economics.
- Admati, Anat R, 1985. "A Noisy Rational Expectations Equilibrium for Multi-asset Securities Markets," Econometrica, Econometric Society, vol. 53(3), pages 629-657, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:urv:wpaper:2072/43862. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ariadna Casals)
If references are entirely missing, you can add them using this form.