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The acquisition of information in a dynamic market

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Summary

This paper models the information acquisition process in an intertemporal rational expectations framework. It demonstrates that equilibria do not generally exist in intertemporal economies in which agents are assumed to know the state-contingent price path and the information acquisition process is endogenous. In addition, an example of a fully revealing equilibrium in which agents pay a strictly positive amount for information is provided. Finally, we also show that it is possible for an equilibrium to exist in which agents choose to purchase information even if all agents, including the agents who purchased the information, are made strictly worse off by the purchase.

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Authors and Affiliations

  1. School of Business Administration, University of Washington, Box 353200, 98195-3200, Seattle, WA, USA

    Jonathan B. Berk

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  1. Jonathan B. Berk
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Additional information

The author would like to thank Kerry Back, Gerry Feltham Rich Kihlstrom, Vasant Naik, Bryan Routledge, Harald Uhlig and Josef Zechner for their comments and suggestions. A special note of thanks is due to the (anonymous) referee.

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Berk, J.B. The acquisition of information in a dynamic market. Econ Theory 9, 441–451 (1997). https://doi.org/10.1007/BF01213848

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  • DOI: https://doi.org/10.1007/BF01213848

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