English, Article, Journal or magazine article edition: On the Co-evolution of Insider Information and Idiosyncratic Beliefs Thomas Gehrig; Werner Gueth; Rene Levinsky

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Bookmark: http://trove.nla.gov.au/version/1216
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • On the Co-evolution of Insider Information and Idiosyncratic Beliefs
Author
  • Thomas Gehrig
  • Werner Gueth
  • Rene Levinsky
Physical Description
  • preprint
Notes
  • In a market with stochastic demand at most one seller can acquire costly information about demand. Other sellers entertain idiosyncratic beliefs about the market demand and the probability that an informed seller is trading in the market. These idiosyncratic beliefs co-evolve with the potential insider's inclination to acquire information. True demand expectations are not evolutionarily stable when beliefs, via revelation, can be used to commit to more aggressive behavior. The commitment effect fades away in large markets and has the same direction for both strategic substitutes and complements. Whether one observes an insider, in the long run, depends on information costs. For strategic substitutes insider activity benefits the whole population whereas the uninformed sellers could gain even more than the insider.
  • co-evolution of idiosyncratic beliefs, inside information, heterogeneous markets, information sharing.
  • RePEc:jrp:jrpwrp:2007-068
Language
  • English
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