Journal Articles

Risk Aversion, Imperfect Competition, and Long-Lived Private Information

1994, Economics Letters

Craig W. Holden, Avanidhar Subrahmanyam

Abstract

This paper presents a methodology for characterizing the optimal dynamic behavior of risk-averse, strategic agents with
private information, by building on Kyle (Econometrica, 1985, 53, 1315-1335). It is shown that both monopolistic and
competing informed traders choose to exploit rents rapidly, causing market depth to be low in the initial periods and high in later periods, and causing information to be revealed rapidly, unlike in the case of a risk-neutral monopolist considered by Kyle.

Citation

Holden, Craig W. and Avanidhar Subrahmanyam (1994), “Risk Aversion, Imperfect Competition, and Long-Lived Private Information,” Economics Letters, Vol. 44, pp. 181-190.

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Kelley School of Business

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