Competitive Markets and Aggregate Information
This paper shows that a competitive market structure is identically efficient to a Walrasian rational expectations market when risk-averse agents base trades only on unbiased private signals. Because price reflects the complete set of market information, it is a sufficient statistic. The economic role of competing market makers is thus to aggregate information efficiently.
Volume (Year): 29 (2003)
Issue (Month): 4 (Fall)
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