Competing for Attention in Financial Markets / Bruce Ian Carlin, Shaun William Davies, Andrew Miles Iannaccone.

Format:

Book

Author/Creator:

Carlin, Bruce Ian.

Contributor:

National Bureau of Economic Research.

Davies, Shaun William.

Iannaccone, Andrew Miles.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16085.

NBER working paper series no. w16085

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

Competition for positive attention in financial markets frequently resembles a tournament, where superior relative performance and greater visibility are rewarded with convex payoffs. We present a rational expectations model in which firms compete for such positive attention and show that higher competition for this prize makes discretionary disclosure less likely. In the limit when the market is perfectly competitive, transparency is minimized. We show that this effect persists when considering general prize structures, prizes that change in size as a result of competition, endogenous prizes, prizes granted on the basis of percentile, product market competition, and alternative game theoretic formulations. The analysis implies that competition is unreliable as a driver of market transparency and should not be viewed as a panacea that assures self-regulation in financial markets.

Notes:

Print version record

June 2010.