An equilibrium trading volume model in presence of heterogeneous biased estimations and information acquisition costs
Turinici, Gabriel; Haguet, Eleonore; Bialecki, Agnes (2012), An equilibrium trading volume model in presence of heterogeneous biased estimations and information acquisition costs. https://basepub.dauphine.fr/handle/123456789/9880
TypeDocument de travail / Working paper
External document linkhttp://hal.archives-ouvertes.fr/hal-00723189
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Abstract (EN)We consider a two period model in which a continuum of agents trade in a context of costly information acquisition and systematic heterogeneous expectations biases. We show that under very weak technical assumptions a market equilibrium exists and the supply and demand functions are strictly monotonic with respect to the price. The equilibrium price is also shown to be the price that maximizes the trading volume. We prove additional properties such as the anti-monotony of the trading volume with respect to the marginal information price.
Subjects / Keywordscostly information; Grossman-Stiglitz paradox; heterogeneous estimations; heterogeneous beliefs; information acquisition
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