Publicação
General equilibrium under asymmetric information, in an economy with indexed assets and default penalties
| Resumo: | This dissertation departures from the usual price taking and non-exclusive asset pooling assumptions in the literature on general equilibrium under uncertainty and asymmetric information and where traders can default on the payment of asset returns, by assuming that traders negotiate exclusive assets through a process of bilateral, non -anonymous negotiation, and some of them (the less informed ones, actually) may possess some degree of market power in this negotiation process. It is established, for a particular model featuring these non-standard assumptions, that equilibrium exists under not too restrictive hypothesis. This equilibrium, which can be either a walrasian equilibrium or a rational expectations equilibrium, can display interesting properties in terms of the reduction of adverse selection problems, thus leading to an increase in economic efficiency in comparison to the anonymous negotiation setting, at least if the cost of the bilateral negotiation process is not to high. This happens because, if the bilateral negotiation is performed in a convenient way, some private information can be disclosed and so contracts can be better tailored, in contrast with the usual type of framework, in which every trader faces exactly the same market conditions regardless of what their identity or type is, and thus asset prices reflect the average type (or risk) of all traders, penalizing the ones that represent the lower risk and eventually driving them out of the market. |
|---|---|
| Autores principais: | Gouveia, Nuno Miguel Teles |
| Assunto: | Asymmetric information Adverse selection Default penalties Indexed assets Exclusive contracts Bilateral negotiation Equilibrium |
| Ano: | 2003 |
| País: | Portugal |
| Tipo de documento: | tese de doutoramento |
| Tipo de acesso: | acesso restrito |
| Instituição associada: | Universidade Nova de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório Institucional da UNL |
| Resumo: | This dissertation departures from the usual price taking and non-exclusive asset pooling assumptions in the literature on general equilibrium under uncertainty and asymmetric information and where traders can default on the payment of asset returns, by assuming that traders negotiate exclusive assets through a process of bilateral, non -anonymous negotiation, and some of them (the less informed ones, actually) may possess some degree of market power in this negotiation process. It is established, for a particular model featuring these non-standard assumptions, that equilibrium exists under not too restrictive hypothesis. This equilibrium, which can be either a walrasian equilibrium or a rational expectations equilibrium, can display interesting properties in terms of the reduction of adverse selection problems, thus leading to an increase in economic efficiency in comparison to the anonymous negotiation setting, at least if the cost of the bilateral negotiation process is not to high. This happens because, if the bilateral negotiation is performed in a convenient way, some private information can be disclosed and so contracts can be better tailored, in contrast with the usual type of framework, in which every trader faces exactly the same market conditions regardless of what their identity or type is, and thus asset prices reflect the average type (or risk) of all traders, penalizing the ones that represent the lower risk and eventually driving them out of the market. |
|---|