Strategic Trading and Welfare in a Dynamic Market

Dimitri Vayanos

The Review of Economic Studies, 1999, vol. 66, issue 2, 219-254

Abstract: This paper studies a dynamic model of a financial market with N strategic agents. Agents receive random stock endowments at each period and trade to share dividend risk. Endowments are the only private information in the model. We find that agents trade slowly even when the time between trades goes to 0. In fact, welfare loss due to strategic behaviour increases as the time between trades decreases. In the limit when the time between trades goes to 0, welfare loss is of order 1/N, and not 1/N2 as in the static models of the double auctions literature. The model is very tractable and closed-form solutions are obtained in a special case.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (82)

Downloads: (external link)
http://hdl.handle.net/10.1111/1467-937X.00086 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Strategic trading and welfare in a dynamic market (1999)
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:oup:restud:v:66:y:1999:i:2:p:219-254.

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().