Template-Type: ReDIF-Paper 1.0
Title: On the Informational Efficiency of a Monopolistic Financial Market
Author-Name: Georg Nöldeke
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Abstract: This paper introduces a class of signalling games with response 
 intersection to discuss the informational efficiency of a monopolistic 
 financial market. For these games a necessary and sufficient condition for 
 the existence of a fully revealing sequential equilibrium outcomes is 
 derived. Furthermore a complete characterization of the set of Riley 
 outcomes, which correspond to a refinement of the sequential equilibrium 
 concept, is given. These results are then applied to a model of trade in a 
 risky asset to identify conditions under which the market outcome will fully 
 reveal the private information of an insider. The model also yields a simple 
 necessary and sufficient condition for the "no trade"-outcome to be the 
 unique Riley outcome - thus allowing some insight into the circumstances 
 which lead to the collapse of trade due to the presence of inside 
 information.
Series: Sonderforschungsbereich 303, University of Bonn, Germany
Length: 53 pages
Creation-Date: 1991-12
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Handle: RePEc:bon:bonsfb:203