Asymmetric information in a competitive market game: Reexamining the implications of rational expectations
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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.
- Asymmetric information in a competitive market game: Reexamining the implications of rational expectations
Volume 13, Issue 3 , pp 603-628
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- Keywords and Phrases: Market game Excess volatility
- Rational expectations
- Asymmetric information
- Information acquisition.
- JEL Classification Numbers: G12
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- Author Affiliations
- A1. Division of Humanities and Social Sciences 228-77, Caltech, Pasadena, CA 91125, USA (e-mail: email@example.com), US
- A2. Department of Economics, The Ohio State University, 1945 N. High Street, Columbus, OH 43210-1172, USA (e-mail: firstname.lastname@example.org), US