D
Demerzel
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Competitive Trading Equilibria under Incomplete Information
Extends the theory of trading in competition (multiple firms acquiring the same asset over a common period, each minimizing implementation cost under a linear Almgren-Chriss market-impact model) from complete to incomplete information. Using Harsanyi's framework of Bayesian games, firms hold diverse beliefs about competitors' target sizes and market-impact parameters; the incomplete-information game is transformed into an equivalent complete-information game whose Nash equilibria map back to Bayesian Nash equilibria of the original. Derives optimal n-firm trading strategies under uncertainty and models non-strategic traders whose characteristics strategic firms disagree on.