English, Article edition: A STRATEGIC ANALYSIS OF SPECULATIVE TRADE IN A TWO-SIDED ASSET MARKET WITH INFORMATION DIVERSITY BETTINA ROCKENBACH

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Bookmark: http://trove.nla.gov.au/version/144546
Physical Description
  • article
Language
  • English

Edition details

Title
  • A STRATEGIC ANALYSIS OF SPECULATIVE TRADE IN A TWO-SIDED ASSET MARKET WITH INFORMATION DIVERSITY
Author
  • BETTINA ROCKENBACH
Physical Description
  • article
Notes
  • The impossibility of speculative trade result (Milgrom and Stokey, 1982) provokes the questions why traders care about their private information, if they cannot profit from it and how the aggregate information can then be reflected in REE prices. This paper answers these questions by analyzing a speculative market as a game, which has the advantage of making the equilibrium strategies explicit. We introduce the new equilibrium selection concept of best reply resistance, which singles out those equilibria that remain an equilibrium even if opponent(s) deviate to a best reply. In the unique best reply resistant equilibrium of the two-player game trade at the REE price occurs each time both traders receive contradicting private information.
  • Speculative trade, betting, game theory, JEL-Classification: C72, JEL-Classification: D44, JEL-Classification: D82, JEL-Classification: D84
  • RePEc:wsi:igtrxx:v:07:y:2005:i:02:p:151-170
Language
  • English
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