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Efficiency in Decentralized Markets with Aggregate Uncertainty

Author

Listed:
  • Lucas Maestri

    (FGV/EPGE)

  • Dino Gerardi

    (Collegio Carlo Alberto)

  • Braz Camargo

    (Sao Paulo School of Economics - FGV)

Abstract

We study efficiency in decentralized markets with aggregate uncertainty and one-sided private information. There is a continuum of mass one of uninformed buyers and a continuum of mass one of informed sellers. Buyers and sellers are randomly and anonymously matched in pairs over time, and buyers make the offers. We show that all equilibria become efficient as trading frictions vanish.

Suggested Citation

  • Lucas Maestri & Dino Gerardi & Braz Camargo, 2016. "Efficiency in Decentralized Markets with Aggregate Uncertainty," 2016 Meeting Papers 103, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:103
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    References listed on IDEAS

    as
    1. Mark Satterthwaite & Artyom Shneyerov, 2007. "Dynamic Matching, Two-Sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition," Econometrica, Econometric Society, vol. 75(1), pages 155-200, January.
    2. Serrano, Roberto, 2002. "Decentralized information and the Walrasian outcome: a pairwise meetings market with private values," Journal of Mathematical Economics, Elsevier, vol. 38(1-2), pages 65-89, September.
    3. Gianni De Fraja & Jozsef Sakovics, 2001. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 842-863, August.
    4. Stephan Lauermann, 2013. "Dynamic Matching and Bargaining Games: A General Approach," American Economic Review, American Economic Association, vol. 103(2), pages 663-689, April.
    5. Max R. Blouin & Roberto Serrano, 2001. "A Decentralized Market with Common Values Uncertainty: Non-Steady States," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 323-346.
    6. Mikhail Golosov & Guido Lorenzoni & Aleh Tsyvinski, 2014. "Decentralized Trading With Private Information," Econometrica, Econometric Society, vol. 82(3), pages 1055-1091, May.
    7. Stephan Lauermann & Asher Wolinsky, 2016. "Search With Adverse Selection," Econometrica, Econometric Society, vol. 84, pages 243-315, January.
    8. Wolinsky, Asher, 1990. "Information Revelation in a Market with Pairwise Meetings," Econometrica, Econometric Society, vol. 58(1), pages 1-23, January.
    9. Diego Moreno & John Wooders, 2010. "Decentralized Trade Mitigates The Lemons Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 383-399, May.
    10. Asher Wolinsky, 1988. "Dynamic Markets with Competitive Bidding," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 71-84.
    11. Max R. Blouin, 2003. "Equilibrium in a decentralized market with adverse selection," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(2), pages 245-262, September.
    12. Max Blouin, 2001. "Equilibrium in a Decentralized Market with Adverse Selection," Cahiers de recherche CREFE / CREFE Working Papers 128, CREFE, Université du Québec à Montréal, revised Mar 2001.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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