Information: Price and impact on general welfare and optimal investment. An anticipative stochastic differential game model

Christian Oliver Ewald, Yajun Xiao

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)97-120
Number of pages24
JournalAdvances in Applied Probability
Volume43
Issue number1
DOIs
Publication statusPublished - Mar 2011
Externally publishedYes

Keywords

  • Financial market
  • Information
  • Stochastic differential game

Fingerprint

Dive into the research topics of 'Information: Price and impact on general welfare and optimal investment. An anticipative stochastic differential game model'. Together they form a unique fingerprint.

Cite this