Strategic market games with interim price information
Year: 2025
Type: article
Abstract: Is it possible to incorporate the rational expectations concept of interim price information from competitive equilibrium models into simultaneous move games? In addressing consistency and measurability issues that arise from the "chicken-egg" problem of rational expectations, strategic market games with interim price information do exactly that. In these non-Bayesian games informed traders simultaneously submit their linear demand-schedules to a Walrasian auctioneer after they have observed their private signals and their interim price information. I show that a specific class of Bayesian Nash equilibria from Bayesian market games (Kyle 1989; Vives 2011) carries over to 'become' Nash equilibria of strategic market games with interim price information. I also show that conditioning on interim price information may give rise to Nash equilibria that support price-collusion between informed traders against a liquidity trader (e.g., the government in a procurement situation).
Source: ERSA Working Paper Series
DOI: 10.71587/f33jwh73
Author: Zimper, Alexander
Institution: University of Pretoria
Language: English
Topic: Game Theory and Applications
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6958770611
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