Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81107
Authors: 
Brangewitz, Sonja
Giraud, Gaël
Year of Publication: 
2011
Series/Report no.: 
Working Papers, Institute of Mathematical Economics 456
Abstract: 
We study a strategic market game with finitely many traders, infinite horizon and real assets. To this standard framework (see, e.g. Giraud and Weyers, 2004) we add two key ingredients: First, default is allowed at equilibrium by means of some collateral requirement for financial assets; second, information among players about the structure of uncertainty is incomplete. We focus on learning equilibria, at the end of which no player has incorrect beliefs - not because those players with heterogeneous beliefs were eliminated from the market (although default is possible at equilibrium) but because they have taken time to update their prior belief. We then prove a partial Folk theorem a la Wiseman (2011) of the following form: For any function that maps each state of the world to a sequence of feasible and sequentially strictly individually rational allocations, and for any degree of precision, there is a perfect Bayesian equilibrium in which patient players learn the realized state with this degree of precision and achieve a payoff close to the one specified for each state.
Subjects: 
Strategic Market Games
Infinite Horizon
Incomplete Markets
Collateral
Incomplete Information
JEL: 
C72
D43
D52
G12
G14
G18
Document Type: 
Working Paper

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