Dr Jekyll and Mr Hyde: Feedback and welfare when hedgers can acquire information
Jacques Olivier
Additional contact information
Jacques Olivier: HEC Paris
No 1469, HEC Research Papers Series from HEC Paris
Abstract:
I analyze welfare in a model where information acquisition is endogenous, information has real effects, and agents are rational. Hedgers derive a private benefit from holding the asset. Information improves welfare if real efficiency gains exceed cost of acquiring information and foregone gains from trade. I show three new results. Hedgers and speculators have different incentives to acquire information. Gains from trade are lower when hedgers acquire information than when speculators do. Agents may produce less information than would be socially optimal, in which case a contract whereby a firm pays a designated market-maker to lower her spread increases welfare.
Keywords: Welfare; information; hedgers; speculators; feedback; regulation; designated market-makers (search for similar items in EconPapers)
JEL-codes: D61 D82 G12 G14 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2023-01-31
New Economics Papers: this item is included in nep-mic
References: Add references at CitEc
Citations:
Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4342867 Full text (text/html)
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:ebg:heccah:1469
DOI: 10.2139/ssrn.4342867
Access Statistics for this paper
More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann (haldemann@hec.fr).