Private Information in Markets: A Market Design Perspective
AbstractThis paper studies the impact of heterogeneity in interdependence of trader values on price inference and welfare. A model of double auction with quasilinear-quadratic utilities is introduced that allows for arbitrary Gaussian information structures. With heterogeneous interdependence, some traders learn more from prices whereas others from private signals; thus, heterogeneity separates informed and uninformed trading. Changes in market structure can improve both informativeness of prices and private signals of a trader and make some traders learn more from prices than others. We characterize conditions on the information structure for price and signal inference to involve no tradeoff.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 13-21.
Length: 45 pages
Date of creation: Sep 2013
Date of revision:
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Web page: http://www.NETinst.org/
Price Inference; Networks; Dark Pools; Market Design;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-05 (All new papers)
- NEP-CTA-2013-10-05 (Contract Theory & Applications)
- NEP-MST-2013-10-05 (Market Microstructure)
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