- A-Z
- Jena Economic Resea...
- Volume 1
- On the Co-evolution...
- Autor(in)
- Erschienen
- 21. September 2007
- Nummer des Discussion-Papers
-
2007-068
- Schlagwort(e)
-
co-evolution of idiosyncratic beliefs
heterogeneous markets
information sharing
inside information
- Zusammenfsg.
-
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 beneļ¬ts the whole population whereas the uninformed sellers could gain even more than the insider.
- article pub. typess JER
- Review Article
- article languages JER
- Englisch
- article research fields JER
- economics
- JEL-Classification for JER
- C79 - Other ; D43 - Oligopoly and Other Forms of Market Imperfection ; D82 - Asymmetric and Private Information