| Abstract: | In this model of a simple capital asset market, agents can acquire information about both the return and the supply of a risky asset. Traders' attitudes towards risk are described by the constant absolute risk tolerance utility function, which implies that the information cost function cannot be linear if traders are to acquire both types. The non-linear cost function results from assumptions made regarding the structure of the information market. The existence of an equilibrium is established by applying Brouwer's fixed point theorem. Among the main results obtained, is that the participants could be better or worse off when information on supply is affordable, as opposed to the case where it is not, depending on the parameters of the model. |
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