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Market Power and Information Revelation in Dynamic Trading

  • Piero Gottardi

    (University of Venezia)

  • Roberto Serrano

    (Brown University)

We study a strategic model of dynamic trading where agents are asymmetrically informed over common value sources of uncertainty. There is a continuum of uninformed buyers and a finite number of sellers, some of them informed. When there is only one seller, full information revelation never occurs in equilibrium and the only information transmission happens in the first period. The outcome with n sellers depends both on the structure of sellers' information and the intensity of competition among them allowed by the market rules. We show that the latter plays an even more important role. With intense competition (absence of clienteles), information is fully and immediately revealed to the buyers in every equilibrium for n large enough, both when all sellers are informed and when only one seller is informed. On the other hand, with a less intense form of competition (presence of clienteles), collusive equilibria, where information is never revealed, also exist, whatever the number of sellers. Moreover, when only one seller is informed, for many parameter configurations there are no equilibria with full information revelation, for any n.

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File URL: http://econwpa.repec.org/eps/game/papers/0203/0203005.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 0203005.

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Length: 40 pages
Date of creation: 14 Mar 2002
Date of revision:
Handle: RePEc:wpa:wuwpga:0203005
Note: Type of Document - pdf; prepared on IBM PC; to print on HP/PostScript; pages: 40
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Martin W Cripps & Jeroen M Swinkels, 2003. "Efficiency of Large Double Auctions," Levine's Working Paper Archive 666156000000000329, David K. Levine.
  2. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
  3. Vives, X., 1992. "The Speed of Information Revelation in a Financial Market Mechanism," UFAE and IAE Working Papers 174.92, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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