Information: price and impact on general welfare and optimal investment. An anticipative stochastic differential game model

Ewald, C.-O. and Xiao, Y. (2011) Information: price and impact on general welfare and optimal investment. An anticipative stochastic differential game model. Advances in Applied Probability, 43(1), pp. 97-120. (doi: 10.1239/aap/1300198514)

Abstract

Within an anticipative stochastic calculus framework, we study a market game with asymmetric information and feedback effects. We derive necessary and sufficient criteria for the existence of Nash equilibria and study how general welfare is affected by the level of information. In particular, we show that, under certain conditions in a competitive environment, an increased level of information may in fact lower the level of general welfare, leading to the so-called Hirshleifer effect (see Hirshleifer (1971)). Finally, we determine equilibrium prices for particular pieces of information, by extending our market game with a pre-stage, in which information is traded.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Ewald, Professor Christian
• Authors: Ewald, C.-O., and Xiao, Y.
• Subjects: H Social Sciences > HB Economic Theory; H Social Sciences > HG Finance
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Advances in Applied Probability
• ISSN: 0001-8678
• ISSN (Online): 1475-6064