An equilibrium trading volume model in presence of heterogeneous biased estimations and information acquisition costs

Agnes Bialecki (1) , Eleonore Haguet (2) , Gabriel Turinici (3)

1 ENS de Lyon - École normale supérieure de Lyon
2 ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique
3 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision

We consider a two period model in which a continuum of agents trade in a context of costly information acquisition and systematic heterogeneous expectations biases. We show that under very weak technical assumptions a market equilibrium exists and the supply and demand functions are strictly monotonic with respect to the price. The equilibrium price is also shown to be the price that maximizes the trading volume. We prove additional properties such as the anti-monotony of the trading volume with respect to the marginal information price.

Mots clés: information acquisition; heterogeneous beliefs; heterogeneous estimations; Grossman-Stiglitz paradox; costly information

Domaines: Finance [q-fin.GN]; Finance quantitative [q-fin.CP]; Microstructure des marchés [q-fin.TR]; Economies et finances

Agnes Bialecki, Eleonore Haguet, Gabriel Turinici. An equilibrium trading volume model in presence of heterogeneous biased estimations and information acquisition costs. 2012. ⟨hal-00723189v1⟩