Dynamic noisy rational expectations equilibrium with insider information: Welfare and regulation

Jerome Detemple, Marcel Rindisbacher and Scott Robertson

Journal of Economic Dynamics and Control, 2022, vol. 141, issue C

Abstract: This paper examines welfare properties of equilibra in the general dynamic model with asymmetric information of Detemple et al. (2020). Explicit formulas for ex-ante and interim welfare are obtained, and equilibria are compared. We show a tax structured as an exchange option based on public information induces the insider to optimally forgo using her private information at all times.

Keywords: Rational expectations equilibrium; Heterogenous information; Diffusions; Welfare; Regulation (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:141:y:2022:i:c:s0165188922000793

DOI: 10.1016/j.jedc.2022.104375

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