Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/39052 
Year of Publication: 
2010
Series/Report no.: 
CESifo Working Paper No. 3137
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study a general static noisy rational expectations model, where investors have private information about asset payoffs, with common and private components, and about their own exposure to an aggregate risk factor, and derive conditions for existence and uniqueness (or multiplicity) of equilibria. We find that a main driver of the characterization of equilibria is whether the actions of investors are strategic substitutes or complements. This latter property in turn is driven by the strength of a private learning channel from prices, arising from the multidimensional sources of asymmetric information, in relation to the usual public learning channel. When the private learning channel is strong (weak) in relation to the public we have strong (weak) strategic complementarity in actions and potentially multiple (unique) equilibria. The results enable a precise characterization of whether information acquisition decisions are strategic substitutes or complements. We find that the strategic substitutability in information acquisition result obtained in Grossman and Stiglitz (1980) is robust.
Subjects: 
rational expectations equilibrium
strategic complementarity
multiplicity of equilibria
asymmetric information
risk exposure
bedging
supply information
JEL: 
D82
D83
G14
Document Type: 
Working Paper
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