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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

Type
Document de travail / Working paper
External document link
http://hal.archives-ouvertes.fr/hal-00723189
Date
2012
Publisher
Université Paris-Dauphine
Published in
Paris
Pages
27
Metadata
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Author(s)
Turinici, Gabriel cc
Haguet, Eleonore
Bialecki, Agnes
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 / Keywords
costly information; Grossman-Stiglitz paradox; heterogeneous estimations; heterogeneous beliefs; information acquisition
JEL
D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
C13 - Estimation: General