Rational Expectations Equilibrium Analysis on Newsvendor Model with Information Transfer

Abstract

Trading behaviors in a game between buyers and sellers in E-Commerce market are not only a stochastic process, but also reflect the equilibrium of the existence and consistency. Based on newsvendor model, the structure of information asymmetry commodity trading market is designed and constructed. According to transferring value of information attributes, two definitions of equilibrium in two stages are presented and these properties on the equilibrium condition are analyzed. These findings or results reveal that profit value of inventory level in rational expectations equilibrium (REE) is larger than in nonequilibrium. Finally, one numerical example with normal demand function is analyzed to verify the validity of the rational expectations equilibrium.