Microeconomic Theory Seminar

Speaker: Ji Hee Yoon (UCL)

Title: Dynamic Trading and Inference in Non-Markovian Equilibria

Format: Hybrid

Abstract: We analyze dynamic imperfectly competitive markets based on Cournot competition among traders who have private information. The model accommodates heterogeneity in traders’ risk preferences and general interdependence in traders’ valuations. Equilibrium strategies in any round depend on the entire history of past prices. The price process is endogenously non-Markovian. In settings both Markovian and non-Markovian equilibria exist (namely, with symmetric traders), we show that the non-Markovian equilibrium is robust to infinitesimal changes in preferences and shock distributions, while the Markovian equilibrium is not. We provide a recursive and a nonrecursive characterization of the non-Markovian equilibrium and discuss the advantages of each characterization.

Organiser: Changhwa Lee