Bidding games with several risky assets and random walks of stock market prices

V. L. Kreps; V. C. Domansky

?

Bidding games with several risky assets and random walks of stock market prices

Contributions to Game Theory and Management. 2014. Vol. 8. P. 21–34.

Kreps V. L., Domansky V. C.

We consider multistage bidding models where several types of risky assets (shares) are traded between two agents that have different information on the liquidation prices of traded assets. These random prices depend on “a state of nature”, that is determined by the initial chance move according to a probability distribution that is known to both players. Player 1 (insider) is informed on the state of nature, but Player 2 is not. The bids may take any integer values. The n-stage model is reduced to a zero-sum repeated game with lack of information on one side of Player 2. We show that, if liquidation prices of shares have finite variances, then the sequence of values of n-step games is bounded. This makes it reasonable to consider the bidding of unlimited duration. We give the solutions for corresponding infinite games. Analogously to the case of two risky assets (see Domansky and Kreps (2013)) the optimal strategy of Player 1 generates a random walk of transaction prices. The symmetry of this random walk is broken at the final stages of the game.

Priority areas: economics mathematics

Language: English

Keywords: asymmetric information multistage bidding price fluctuation

Vague stimulating ideas, images and metaphors in scientific thinking: researchers' work with horizons of unclear knowledge

Poddiakov A., / Series Social Science Research Network "Social Science Research Network". 2026. No. 7437658.

Clarity of knowledge and reasoning is necessary in many cases. Yet vagueness in scientific thinking related to surprise, curiosity, "ability to engage with not-knowing" (de Freitas) and abductive reasoning is also a crucially important source of scientific creativity which supplements combinatorial logic when dealing with the already known. Starting from studies by C. S. Peirce ...

Added: September 15, 2026

On phase-lock area parquet in a special slow-fast limit of model of Josephson junction.

Glutsyuk A., / Series arXiv "math". 2026.

B.Josephson (Nobel Prize, 1973) predicted a tunnelling effect for a system of two superconductors separated by a narrow dielectric (such a system is called Josephson junction): existence of a supercurrent through it and equations governing it. The overdamped Josephson junction is modeled by the family of differential equations on the 2-torus, dθdτ=1ω(cosθ+B+Acosτ), which is known as ...

Added: September 8, 2026

Infinitely many graph manifolds with unique geometrical piece that admit arbitrarily many Anosov flows

Pochinka O., Shmukler V., / Series math.RT "arXiv:1808.06395 [math.RT]". 2026.

Anosov flows have a long and rich history, firstly motivated by the study of geodesic flows in negative curvature surface by Anosov and Sinai. Not every closed manifold admits an Anosov flow for well-known reasons: the fundamental group of a 3-manifold M admitting an Anosov flow must have exponential growth, and M must be universally covered by R3. Nevertheless, there ...

Added: August 31, 2026

Institutions, Normative Expectations, and Harassment Bribery: Evidence from a Three-country Experiment

Zhuravleva T., Afanasev K., Engelmann J. et al., / Series "SSRN Working Paper Series". 2026.

Extortionary ("harassment") bribery can persist even when widely condemned, consistent with a coordination problem sustained by beliefs about what others do and what others consider acceptable. We study whether a minimal institutional featurethe presence of a third-party monitor empowered to punish-shifts (i) normative expectations about extortion and compliance and (ii) empirical expectations about their prevalence. ...

Added: July 22, 2026

New bound on S1× S2-setting Bell locality of a nonseparable Werner state

Loubenets E. R., / Series arxiv.org "quant-ph". 2026. No. 2607.18050.

In many quantum applications it is important to know whether or not a Bell nonlocal two-qudit state exhibits its nonlocality under correlation scenarios with some given numbers S1,S2≥1 of generalized quantum measurements at two sites. In the present article, we find analytically a new general locality condition sufficient for a nonseparable Werner state with a ...

Added: July 21, 2026

On functional equations for Chow polylogarithms

Bolbachan V., / Series math "arxiv.org". 2024.

Chow polylogarithms are some special functions arising in explicit description of the Beilinson regulator map. The most interesting functional equation for this function reflects its vanishing on the boundary in the Bloch's cycle complex. We show that this functional equation formally follows from more simple ones, namely skew-symmetry, functoriality and multiplicativity. To prove this, we study ...

Added: July 16, 2026

On Goncharov’s conjecture in next to Milnor degree

Bolbachan V., / Series math "arxiv.org". 2024.

Let K be a field of characteristic zero. We prove that its motivic cohomology in degree m−1 and weight m is rationally isomorphic to the cohomology of the polylogarithmic complex. This gives a partial extension of A. Suslin theorem describing the indecomposable K3 of a field. ...

Added: July 16, 2026

Statistical inference based on band-limited kernels: Rational-infinitely divisible distributions and beyond

Panov V., Ryabchenko A., / Series arXiv "stat.ME". 2026. No. 2607.05048.

This paper investigates the problem of statistical inference for a mixture distribution consisting of a discrete and a continuous component, with a particular focus on the class of rational-infinitely divisible distributions. We consider non-parametric estimation of both components of the mixture as well as the quasi-L{é}vy measure, assuming that the mixture belongs to the class ...

Added: July 9, 2026

Cyclical Fluctuations, Financial Frictions, and Productivity Differences across Firms

Mishin A., Guerrieri L., Kim J., / Series 2026-042 "Finance and Economics Discussion Series (FEDS)". 2026.

Within narrowly defined industries, the most productive firms produce far more than the least productive from the same inputs, and this dispersion widens in downturns. We build a tractable representative-agent model in which financial frictions—adverse selection and moral hazard—make firms sort endogenously into lenders, strategic defaulters, and producers. As credit conditions vary, the resulting misallocation ...

Added: June 28, 2026

Устойчивость на текучей основе: долгосрочная устойчивая цена на нефть

Власов С. А., Nevalennyi M., Сафиулин Р. Р. et al., / Банк России. Серия Аналитическая записка "Материалы Банка России". 2026.

В аналитической записке обсуждается долгосрочно устойчивый уровень цены на российскую нефть. Это тот уровень, к которому цена нефти, вероятнее всего, будет тяготеть в долгосрочной перспективе. Потребность в его определении возникает по нескольким причинам. Во-первых, цена на нефть остается одним из ключевых экономических показателей российской экономики, определяющих экспорт, обменный курс рубля, прибыль, доходы и расходы бюджета, ...

Added: June 27, 2026

Учебная модель малой открытой экономики для анализа денежно-кредитной политики (с примерами из практики Банка России

Глазова А. М., Nevalennyi M., Синяков А. А., / Банк России. Серия Препринты Банка России "Серия докладов об экономических исследованиях". 2025. № 154.

The paper proposes a graphical model of a small open economy. The dynamics of the graphical model is then illustrated using impulse responses from the corresponding formal semi-structural model (QPM model). The authors have several goals in preparing this description of the graphical macroeconomic model. The first goal of the paper is to present an adapted ...

Added: June 27, 2026

A Static Capital Buffer is Hard To Beat

Mishin A., Guerrieri L., Canzoneri M. et al., / Series 2026-042 "Finance and Economics Discussion Series (FEDS)". 2026.

Added: June 27, 2026

Strong Approximations for Markov Chains Weakly Converging to Diffusions

Konakov V., Kucher D., Mammen E., / Series arXiv "math". 2026. No. 2606.11142v1.

In this paper, we construct strong approximations for discrete-time Markov chains weakly converging to continuous diffusion processes, as well as for their perturbed counterparts. Under the assumption of bounded coefficients, we construct closely coupled versions of these processes on a shared probability space. In particular, for both non-degenerate and degenerate cases, we maximize the probability ...

Added: June 11, 2026

Hybrid Competition under Fragmented Demand and Limited Consumer Choice

Bogatyrev R., Sandomirskaia M., / NRU Higher School of Economics. Series EC "Economics". 2026. No. 19(1).

This work develops a tractable model of price competition in fragmented markets where consumers consider both local and distant varieties, with cross-regional purchases subject to stochastic costs. Global competition and full localization emerge as polar cases; hybrid competition is not merely intermediate and exhibits distinctive features such as an endogenous price ceiling and non-monotonic entry ...

Added: June 11, 2026

How Universal is the Cool Water Effect? Evidence from the Unlikely Case of Russia

Kravtsova M., Musaev A. U., Welzel C., / Series "SSRN Working Paper Series". 2026.

Elaborating on Welzel et al.'s "Cool Water Theory," our study zooms into the more limited (albeit still varied) framework conditions of Russia's huge territory. Within Russia's confines, we examine how the combination of moderately cool seasons with steady rain (i.e., Cool Water) affects sub-national areas' contemporary societal progress in two modernization indicators: material prosperity in ...

Added: June 3, 2026

Финансовая грамотность и ответственное финансовое поведение российских домохозяйств

Синяков А. А., Зверева В., Шелованова Т. И., / Центральный банк Российской Федерации. Серия 132 / 2024 "Серия докладов об экономических исследованиях". 2024. № 132.

At the end of 2023, Russia updated its Strategy for Improving Financial Literacy and Developing Financial Culture Until 2030. Unlike the previous strategy, the current strategic goals include not only financial literacy but also financial culture. ‘Culture’ is normative and socially preferred behaviour. The updated strategy brings into focus the relationship between financial literacy and responsible financial behaviour. To explore this relationship, the authors rely on data from the All-Russian Survey of Consumer Finance (2020 and 2022). Socially ...

Added: June 1, 2026

Почему растущие доходы не делают людей счастливее: эмоциональное объяснение парадокса Истерлина (Why Growing Incomes Do Not Make People Happier: an Emotional Explanation of the Easterlin Paradox)

Vorchik A., / SSRN. Серия Social Science Research Network "Social Science Research Network". 2026.

This work is devoted to a theoretical explanation of the Easterlin paradox, according to which long-term economic growth does not make average level of people's happiness increasing. By happiness, we mean the intensity of emotions people experience while comparing their new income with its expected value, or the target income with its original value. In the first case, ...

Added: May 31, 2026

Bifurcations and Structural Stability of Generic PC-HC Families

Dorovskiy A., / Series arXiv "math". 2026.

In this paper the structural stability of generic families of vector fields of the PC-HC class on the two-dimensional sphere is proved. A classification of these families up to moderate equivalence in neighborhoods of their large bifurcation supports is presented, based on such invariants as the configuration and the characteristic set. The realization lemma is proved. ...

Added: May 14, 2026

Equity-based incentive to coordinate shareholder-manager interests under information asymmetry

Zhou Z., Yin Y., Zhou M. et al., Journal of Industrial and Management Optimization 2021 P. 1–24

The shareholder’s interest oriented from business operation relies on opportunism regulation of the manager under asymmetry. Effective motivation incentives should be exploited to facilitate the manager’s effort devotion enthusiasms. This paper establishes a theoretic model in which the shareholder offers equity-based incentive to a fairness-preferred manager to coordinate their interest conflicts and maximize her expected ...

Added: October 3, 2021

A theory of dynamic contracting with financial constraints

Krasikov I., Lamba R., Journal of Economic Theory 2021 No. 193 Article 105196

Financial constraints preclude many surplus producing economic transactions, and inhibit the growth of many others. This paper models financial constraints as the interaction of two forces: the agent has persistent private information and is strapped for cash. The wedge between the optimal and efficient allocation, termed distortion, increases over time with each successive “bad shock” ...

Added: March 3, 2021

Репутация университета, международные рейтинги и благоприятный отбор

Savitskaya E. V., В кн.: Большая Евразия: Развитие, безопасность, сотрудничество. Ежегодник. Вып. 3. Ч. 1. Материалы XIX Национальной научной конференции с международным участием «Модернизация России: приоритеты, проблемы, решения». Ч. 2.: ИНИОН РАН. Отд. науч. сотрудничества, 2020. С. 735–739.

Попадание университета в мировые рейтинги - наряду со сложившейся репутацией вуза - рассматриваются абитуриентами как сигналы о его качестве. Если эти сигналы адекватно отражают качество учебного процесса, то информационная асимметрия преодолевается, и наличие в высшем образовании элитного и массового сегмента соответствует разделяющему равновесию. Если же сигналы содержат искажения, а абитуриенты об этом не знают, то асимметричная ...

Added: May 20, 2020

Bidding Models and Repeated Games with Incomplete Information: A Survey

V.L. Kreps, Automation and Remote Control 2019 Vol. 80 No. 2 P. 362–379

Using a simplified multistage bidding model with asymmetrically informed agents, De Meyer and Saley [17] demonstrated an idea of endogenous origin of the Brownian component in the evolution of prices on stock markets: random price fluctuations may be caused by strategic randomization of “insiders.” The model is reduced to a repeated game with incomplete information. ...

Added: May 7, 2019

Роль корпоративного риск-менеджмента в снижении последствий инвестиционной близорукости

Makarova V. A., Кальченко А. В., Пацей Л. А., Научный журнал НИУ ИТМО. Серия: Экономика и экологический менеджмент 2018 № 3 С. 61–75

Within the framework of this work, the phenomenon of short-termism as an obstacle to the creation of a long-term strategy has been studied using the example of the Russian metallurgical industry. Disclosure of factors to strengthen the policy of short-term decisions occurs through the theory of information asymmetry. Speaking particularly about short-run planning horizons, we ...

Added: October 2, 2018

ВЫСШЕЕ ОБРАЗОВАНИЕ: РЕПУТАЦИОННЫЕ ЭФФЕКТЫ, СИГНАЛЬНЫЕ ИСКАЖЕНИЯ И БЛАГОПРИЯТНЫЙ ОТБОР

Savitskaya E. V., Алтунина Н. С., Журнал институциональных исследований 2017 Т. 9 № 1 С. 117–133

In the article, we attempt to underpin the hypothesis that under certain conditions a propitious selection may take place on the higher education market. It is a phenomenon when brand universities automatically reproduce their positive reputation without improving the quality of teaching due to influx of talented entrants. We apply econometric modelling and regression analysis ...

Added: March 21, 2017