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Noise and competition in strategic oligopoly

Dridi, Ramdan and Germain, Laurent Noise and competition in strategic oligopoly. (2009) Journal of financial intermediation, 18 (2). pp. 311-327. ISSN 1042-9573

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Official URL: http://dx.doi.org/10.1016/j.jfi.2008.09.002

Abstract

In this paper, we propose a model where N strategic informed traders who are endowed with heterogeneous noisy signals with different precisions compete in a market with a single risky asset. We explicitly describe the unique linear equilibrium that exists in this setup and derive its properties. Moreover, we focus on the effects of noise on the competition between traders. We show that noise softens the competition between traders. In particular, for N exceeding three and for certain sets of noise in traders' signals, each trader's individual profit is greater than the one obtained in the case of perfect information.

Item Type:Article
Audience (journal):International peer-reviewed journal
Uncontrolled Keywords:
Institution: Université de Toulouse > Institut Supérieur de l'Aéronautique et de l'Espace - ISAE
Université de Toulouse > Groupe École Supérieure de Commerce de Toulouse - ESCT
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Deposited By: odile huynh
Deposited On:13 Jun 2012 13:25

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