Heterogeneous Beliefs and Imperfect Competition in Sequential Auction Markets

Fabrice Rousseau, Hervé Boco and Laurent Germain
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Hervé Boco: Toulouse University, Toulouse Business School, France
Laurent Germain: Toulouse University, Toulouse Business School, France

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: This paper analyzes a multi-auction setting in which informed strategic agents are endowed with heterogeneous noisy signals about the liquidation value of a risky asset. One result is that when the variance of the noise is small the competition between traders takes the form of a rat race during all the periods of trading. As we increase the level of the noise in the traders’ signals, a waiting game phase appears and the intensity of the rat race, observed only at the last auctions, decreases. In sharp contrast with the previous literature, when the variance of the noise is very large, we only observe a waiting game.

Keywords: efficiency; asymmetric information; noise; liquidity; adverse selection; competition (search for similar items in EconPapers)
Pages: 47 pages
Date: 2015
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth, nep-mic and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:may:mayecw:n258-15.pdf

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