Non-Hierarchical Signalling: Two-Stage Financing Game
Miglo, Anton and Zenkevich, Nikolay (2006) Non-Hierarchical Signalling: Two-Stage Financing Game. International Journal of Mathematics, Game Theory and Algebra, 15 (3). pp. 257-273. ISSN 1099-1859
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Abstract
The literature analyzing games where some players have private information about their types is usually based on the duality of good and bad types (GB approach), where good type denotes the type with better quality. In contrast, this paper analyzes a signalling game without types hierarchy. Different types have the same average qualities but different profiles of quality over time which are their private information. We apply this idea to analyze a financing-investment game where firms' insiders have private information about the firm's profit profile over time. If transporting cash between period is costless equilibrium is pooling with up-front equity financing. Otherwise equilibrium is either pooling with debt when the economy is stagnating, or separating when the economy is growing (some firms issue debt and some firms issue shares). This provides new theoretical results that cannot be explained by the standard GB models and which are consistent with some financial market phenomena.
| Item Type: | Article | ||||||
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| Subjects: | CAH09 - mathematical sciences > CAH09-01 - mathematical sciences > CAH09-01-01 - mathematics CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics CAH17 - business and management > CAH17-01 - business and management > CAH17-01-02 - business studies CAH17 - business and management > CAH17-01 - business and management > CAH17-01-04 - management studies CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance |
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| Divisions: | Faculty of Business, Law and Social Sciences > Birmingham City Business School | ||||||
| Depositing User: | Anton Miglo | ||||||
| Date Deposited: | 13 Aug 2018 08:20 | ||||||
| Last Modified: | 22 Mar 2023 11:49 | ||||||
| URI: | https://www.open-access.bcu.ac.uk/id/eprint/6213 |
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