Repeated games with asymmetric information and random price fluctuations at finance markets: the case of countable state space

Victor C. Domansky () and Victoria L. Kreps ()
Additional contact information
Victor C. Domansky: St. Petersburg Institute for Economics and Mathematics - RAS - Russian Academy of Sciences [Moscow]
Victoria L. Kreps: St. Petersburg Institute for Economics and Mathematics - RAS - Russian Academy of Sciences [Moscow]

Post-Print from HAL

Abstract: This paper is concerned with multistage bidding models introduced by De Meyer and Moussa Saley (2002) to analyze the evolution of the price system at finance markets with asymmetric information. The zero-sum repeated games with incomplete information are considered modeling the bidding with countable sets of possible prices and admissible bids. It is shown that, if the liquidation price of a share has a finite variance, then the sequence of values of n-step games is bounded and converges to the value of the game with infinite number of steps. We construct explicitly the optimal strategies for this game. The optimal strategy of Player 1 (the insider) generates a symmetric random walk of posterior mathematical expectations of liquidation price with absorption. The expected duration of this random walk is equal to the initial variance of liquidation price. The guaranteed total gain of Player 1 (the value of the game) is equal to this expected duration multiplied with the fixed gain per step.

Keywords: optimal strategy; Multistage bidding; asymmetric information; repeated games; optimal strategy.; Enchères répétées; information asymétrique; jeux répétés; stratégie optimale. (search for similar items in EconPapers)
Date: 2009-05
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00390701v1
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Published in 2009

Downloads: (external link)
https://shs.hal.science/halshs-00390701v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00390701

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().