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Repeated Trading: Transparency and Market Structure

Author

Listed:
  • Ayca Kaya

    (University of Miami)

  • Santanu Roy

    (Southern Methodist University)

Abstract

We analyze the effect of transparency of past trading volumes in markets where an informed long-lived seller can repeatedly trade with short-lived uninformed buyers. Transparency allows buyers to observe previously sold quantities. In markets with intra-period monopsony (single buyer each period), transparency reduces welfare if the ex-ante expected quality is low, but improves welfare if the expected quality is high. The effect is reversed in markets with intra-period competition (multiple buyers each period). This discrepancy in the efficiency implications of transparency is explained by how buyer competition affects the seller's ability to capture rents, which, in turn, influences market screening.

Suggested Citation

  • Ayca Kaya & Santanu Roy, 2023. "Repeated Trading: Transparency and Market Structure," Departmental Working Papers 2301, Southern Methodist University, Department of Economics.
    • Handle: RePEc:smu:ecowpa:2301
    as

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    File URL: https://ftp1.economics.smu.edu/WorkingPapers/2023/ROY/ROY-2023-01.pdf
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    References listed on IDEAS

    as
    1. Maarten C. W. Janssen & Santanu Roy, 2002. "Dynamic Trading in a Durable Good Market with Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 257-282, February.
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    3. Kim, Kyungmin, 2017. "Information about sellers' past behavior in the market for lemons," Journal of Economic Theory, Elsevier, vol. 169(C), pages 365-399.
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    6. Johannes Hörner & Nicolas Vieille, 2009. "Public vs. Private Offers in the Market for Lemons," Econometrica, Econometric Society, vol. 77(1), pages 29-69, January.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Repeated sales; adverse selection; transparency; competition; market efficiency;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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