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