We study an economy with segmented financial markets and strategic arbitrageurs who link these markets. We show that the equilibrium of the arbitraged economy is asymptotically Walrasian in the sense that it converges to the equilibrium of an appropriately defined competitive economy with no...

We analyze information production incentives for traders in financial markets, when firms condition investment decisions on information revealed through stock prices. We show that traders' private value of information about a firm's investment project increases with the ex ante likelihood the...