EconPapers    
Economics at your fingertips  
 

Bid-Ask Price Competition with Asymmetric Information between Market Makers

Riccardo Calcagno and Stefano M. Lovo
Additional contact information
Stefano M. Lovo: UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)

No 1998012, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We consider the effect of asymmetric information on price formation process in a financial market where private information is held by a market maker. A model is presented where two market makers with two different information partitions compete in prices. At each stage a bid-ask auction between the market makers occur, and the winner trades the asset against liquidity traders. We show that equilibrium prices do not convey all the information present in the market until the last stage. Moreover, we characterize a set of partially revealing equilibria where the informed market maker's prices do not convey his private information. Informed player's expected equilibrium payoffs depends on the beliefs of the market at the beginning of the game.

Keywords: bid-ask prices; asymmetric information; repeated auction; insider trading (search for similar items in EconPapers)
JEL-codes: D82 D44 G10 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: 1998-05-01
References: Add references at CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
http://sites.uclouvain.be/econ/DP/IRES/9812.ps (application/postscript)

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:ctl:louvir:1998012

Access Statistics for this paper

More papers in Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().

 
Page updated 2019-10-15
Handle: RePEc:ctl:louvir:1998012