TY - JOUR
T1 - Information
T2 - Price and impact on general welfare and optimal investment. An anticipative stochastic differential game model
AU - Ewald, Christian Oliver
AU - Xiao, Yajun
PY - 2011/3
Y1 - 2011/3
N2 - Within an anticipative stochastic calculus framework, we study a market game with asymmetric information and feedback effects. We derive necessary and sufficient criteria for the existence of Nash equilibria and study how general welfare is affected by the level of information. In particular, we show that, under certain conditions in a competitive environment, an increased level of information may in fact lower the level of general welfare, leading to the so-called Hirshleifer effect (see Hirshleifer (1971)). Finally, we determine equilibrium prices for particular pieces of information, by extending our market game with a pre-stage, in which information is traded.
AB - Within an anticipative stochastic calculus framework, we study a market game with asymmetric information and feedback effects. We derive necessary and sufficient criteria for the existence of Nash equilibria and study how general welfare is affected by the level of information. In particular, we show that, under certain conditions in a competitive environment, an increased level of information may in fact lower the level of general welfare, leading to the so-called Hirshleifer effect (see Hirshleifer (1971)). Finally, we determine equilibrium prices for particular pieces of information, by extending our market game with a pre-stage, in which information is traded.
KW - Financial market
KW - Information
KW - Stochastic differential game
UR - http://www.scopus.com/inward/record.url?scp=79953145322&partnerID=8YFLogxK
U2 - 10.1239/aap/1300198514
DO - 10.1239/aap/1300198514
M3 - Article
AN - SCOPUS:79953145322
SN - 0001-8678
VL - 43
SP - 97
EP - 120
JO - Advances in Applied Probability
JF - Advances in Applied Probability
IS - 1
ER -