Memory and Markets

Sergey Kovbasyuk and Giancarlo Spagnolo

No 1606, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: In many environments, including credit and online markets, past records about participants are collected, published, and erased after some time. We study the effects of erasing past records on trade and welfare in a dynamic market where each seller’s quality follows a Markov process and buyers leave feedback about sellers. When the average quality of sellers is low, unlimited records always lead to a market breakdown. Appropriately deleting records, instead, can sustain trade in the long run. Positive and negative records play very different roles, and welfare is maximized for short positive records and long but bounded negative records.

Pages: 45 pages
Date: 2016, Revised 2017-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Memory and Markets (2024)
Working Paper: MEMORY AND MARKETS (2021)
Working Paper: Memory and Markets (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eie:wpaper:1606

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