Supply signals, complementarities, and multiplicity in asset prices and information acquisition∗

Allowing speculation based on private information on a stock’s supply gener-ates (i) complementarity in information acquisition and (ii) multiple equilibria in the financial market and the information market independently in a stan-dard CARA-normal model. Information can be a complement irrespective of the financial market equilibrium coordinated upon and generates multiplicity in the information market. Multiplicity in the financial market exists irrespec-tive of the information market equilibrium and is generated as traders seek to profit from information about the payoffs and the supply of the asset. The multiplicity and complementarity provides insights and explanations for market frenzies and other phenomenon. This extension also allows for general equilib-rium analysis of the financial market suggesting that multiplicity is inherent to the CARA-normal framework