Figure 1 This figure depicts the equilibrium asset price given in Proposition 1, as a function of the compound signal, s. Both panels compare the price function with the Grossman–Stiglitz linear function (the dashed line), which arises in the absence of ambiguity, that is, when μ=0. The region delimited by the vertical dashed lines corresponds to the uninformed agents’ non-participation region. The parameter values are μ=2, ωθ =ω =ωz =τ=1, and μz =0. In the top panel, the proportion of informed agents, λ=0.2, and in the bottom panel, λ=0.5.
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