Abstract
In a financial economy with asymmetric information and incomplete markets, we study how agents, having no model of how equilibrium prices are determined, may still refine their information by eliminating sequentially “arbitrage state(s)”, namely, the state(s) which would grant the agent an arbitrage, if realizable.
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Cornet B., De Boisdeffre L. (2002) Arbitrage and price revelation with asymmetric information and incomplete markets. J Math Econ 38(4): 393–410
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Cornet, B., De Boisdeffre, L. Elimination of arbitrage states in asymmetric information models. Econ Theory 38, 287–293 (2009). https://doi.org/10.1007/s00199-007-0205-z
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DOI: https://doi.org/10.1007/s00199-007-0205-z