Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25634
Authors: 
Gehrig, Thomas P.
Güth, Werner
Levínský, René
Year of Publication: 
2007
Series/Report no.: 
Jena economic research papers 2007,068
Abstract: 
In a market with stochastic demand at most one seller can acquire costly information about demand. Other sellers entertain idiosyncratic beliefs about the market demand and the probability that an informed seller is trading in the market. These idiosyncratic beliefs co-evolve with the potential insider’s inclination to acquire information. True demand expectations are not evolutionarily stable when beliefs, via revelation, can be used to commit to more aggressive behavior. The commitment effect fades away in large markets and has the same direction for both strategic substitutes and complements. Whether one observes an insider, in the long run, depends on information costs. For strategic substitutes insider activity benefits the whole population whereas the uninformed sellers could gain even more than the insider.
Subjects: 
co-evolution of idiosyncratic beliefs
inside information
heterogeneous markets
information sharing
JEL: 
C79
D43
D82
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.