Information Percolation in Segmented Markets

Darrell Duffie, Semyon Malamud and Gustavo Manso

No 17295, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We calculate equilibria of dynamic double-auction markets in which agents are distinguished by their preferences and information. Over time, agents are privately informed by bids and offers. Investors are segmented into groups that differ with respect to characteristics determining information quality, including initial information precision as well as market "connectivity," the expected frequency of their trading opportunities. Investors with superior information sources attain strictly higher expected profits, provided their counterparties are unable to observe the quality of those sources. If, however, the quality of bidders' information sources are commonly observable, then, under conditions, investors with superior information sources have strictly lower expected profits.

JEL-codes: D53 D83 G14 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-cta and nep-mst
Note: AP
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Citations: View citations in EconPapers (7)

Published as "Information Percolation in Segmented Markets" (with Semyon Malamud and Gustavo Manso), Graduate School of Business, Stanford University, forthcoming, Journal of Economic Theory, 2014, Technical Appendices (published online only).

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Related works:
Journal Article: Information percolation in segmented markets (2014)
Working Paper: Information Percolation in Segmented Markets (2010)
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