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The importance of memory for price discovery in decentralized markets

Author

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  • Jacob D Leshno

    (Booth School of Business [Chicago] - University of Chicago)

  • Bary S R Pradelski

    (POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems - Inria Grenoble - Rhône-Alpes - Inria - Institut National de Recherche en Informatique et en Automatique - LIG - Laboratoire d'Informatique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)

Abstract

We study the dynamics of price discovery in decentralized two-sided markets. We show that there exist memoryless dynamics that converge to the core of the underlying assignment game in which agents' actions depend only on their current payoff. However, we show that for any such dynamic the convergence time can grow exponentially in relation to the population size. We present a natural dynamic in which a player's reservation value provides a summary of his past information and show that this dynamic converges to the core in polynomial time in homogeneous markets.

Suggested Citation

  • Jacob D Leshno & Bary S R Pradelski, 2021. "The importance of memory for price discovery in decentralized markets," Post-Print hal-03100097, HAL.
    • Handle: RePEc:hal:journl:hal-03100097
    DOI: 10.1016/j.geb.2020.11.002
    Note: View the original document on HAL open archive server: https://hal.science/hal-03100097
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    References listed on IDEAS

    as
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    Keywords

    assignment game; price discovery; information; convergence time;
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