Asymmetric information in a competitive market game: Reexamining the implications of rational expectations
- Cite this article as:
- Jackson, M. & Peck, J. Economic Theory (1999) 13: 603. doi:10.1007/s001990050272
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We examine price formation in a simple static model with asymmetric information, an infinite number of risk neutral traders and no noise traders. Here we re-examine four results associated with rational expectations models relating to the existence of fully revealing equilibrium prices, the advantage of becoming informed, the costly acquisition of information, and the impossibility of having equilibrium prices with higher volatility than the underlying fundamentals.