Games with Distorted Information and Self-Verification of Beliefs with Applications to Financial Markets

Czasopismo

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• Autorzy: Agnieszka Wiszniewska-Matyszkiel
• Języki publikacji: EN

Abstrakty

EN

In the paper we examine discrete time dynamic games in which the global state variable changes in response to a certain function of the profile of players' decisions, called statistic, while the players form some expectations about its future values based on the history. Besides, there are also players' private state variables. A general model is built, encompassing both games with finitely many players as well as games with infinitely many players. This model extends the class of games with distorted information considered by the author in [20], in which there were no private state variables and there were much stronger assumptions about the statistic of players' decisions considered. The notions of pre-belief distorted Nash equilibrium (pre-BDNE), self-verification and belief distorted Nash equilibrium (BDNE), defined already in [20], are applied to our wider class of games. The relations between Nash equilibria, pre-BDNE and BDNE are examined as well as the existence and properties of pre-BDNE. A model of a financial market - a simplified stock exchange - is presented as an example. Pre-BDNE using threshold prices are proposed. One of further results in this example is potential self-verification of fundamental beliefs and beliefs in infinite speculative bubbles. (original abstract)

Słowa kluczowe

EN

Game theory; Application of game theory; Financial markets; Nash equilibrium

PL

Teoria gier; Zastosowanie teorii gier; Rynki finansowe; Równowaga Nasha

• Czasopismo: ---
• Strony: 254--275

Twórcy

autor

Agnieszka Wiszniewska-Matyszkiel

• Uniwersytet Warszawski

Bibliografia

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• A. Wiszniewska-Matyszkiel, 2006, Games with Distorted Information and Self-Verification of Beliefs with Applications to Exploitation of Common Resources and Minority Games, preprint 159/2006 Institute of Applied Mathematics and Mechanics, Warsaw University, available at http://www.mimuw.edu.pl/english/research/reports/imsm/; changed and submitted as Belief Distorted Nash Equilibria - introduction of a new kind of equilibrium in dynamic games with distorted information.