Call Auction Markets with Risk-Averse Specialists ()
Abstract
We study a generalization of Kyle’s (1985) model to the case in which the specialist is risk-averse and does not set the transaction price according to semi-strong form efficiency. We see that Kyle’s call auction market is no longer a robust market structure, as linear Bayesian equilibria do not exist, irrespective of fundamentals, such as agents’ information, endowments and preferences. This result holds both when customers can submit only market orders and when limit orders are allowed too.
Share and Cite:
P. Vitale, "Call Auction Markets with Risk-Averse Specialists,"
Theoretical Economics Letters, Vol. 2 No. 2, 2012, pp. 175-179. doi:
10.4236/tel.2012.22030.
Conflicts of Interest
The authors declare no conflicts of interest.
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