On Revelation of Private Information in Stock Market Economies
Marcus Berliant and Sankar De.
Authors registered in the RePEc Author Service: Marcus Berliant ()
No RPF-245, Research Program in Finance Working Papers from University of California at Berkeley
The notion that an agent in a given market can infer from the market price the (non-price) information received by other agents, as embodied in the existing studies of revealing rational expectations equilibrium, requires that the agent know the correct functional relationship between the non-price information of all agents and the resulting equilibrium price. This condition is usually restrictive and unsuitable as a description of reality. In this paper we show that this condition is also unnecessary in a stock market economy where producers or firms use their private information in their own optimization programs,k which include stock purchases. Interestingly, this result does not extend to the case of consumers with private information.
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