Abstract
In this paper, we analyze the indeterminacy of equilibria in financial markets and propose a selection mechanism. We suggest that there is one equilibrium that prevails over the others, as a result of the market power of the agents that some states of nature become monopolists of certain commodities. Given a financial assets model, we define a price game and show the existence of mixed strategies equilibria. Then we purify these equilibria by considering a price game with incomplete information.
| Original language | English |
|---|---|
| Pages (from-to) | 325-340 |
| Number of pages | 16 |
| Journal | Journal of Mathematical Economics |
| Volume | 37 |
| Issue number | 4 |
| Publication status | Published - 2002 |
Keywords
- Continuous random selection
- Financial assets
- Incomplete markets
- Price game
- Purification of equilibria