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Endogenous differential information in financial markets

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  • Sebastian cea-Echenique
  • Juan Pablo Torres-Martínez

Abstract

We develop a two period general equilibrium model with incomplete financial markets and differential information. Making endogenous the traditional informational restriction on consumption, we allow agents to obtain information from physical and financial markets. Thus, the investment in financial promises and the trade of commodities in spot markets appear as natural channels to improve the information that an agent has about the realization of future states of nature.

Suggested Citation

  • Sebastian cea-Echenique & Juan Pablo Torres-Martínez, 2010. "Endogenous differential information in financial markets," Working Papers wp312, University of Chile, Department of Economics.
    • Handle: RePEc:udc:wpaper:wp312
    as

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    References listed on IDEAS

    as
    1. Lionel Boisdeffre, 2007. "No-arbitrage Equilibria with Differential Information: An Existence Proof," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(2), pages 255-269, May.
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    More about this item

    Keywords

    Incomplete Markets; Differential information; Enlightening equilibrium.;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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