The importance of memory for price discovery in decentralized markets

Jacob Leshno and Bary Pradelski (bary.pradelski@cnrs.fr)
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Jacob Leshno: Booth School of Business [Chicago] - University of Chicago
Bary Pradelski: POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems - Centre Inria de l'Université Grenoble Alpes - Inria - Institut National de Recherche en Informatique et en Automatique - LIG - Laboratoire d'Informatique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes

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Abstract: We study the dynamics of price discovery in decentralized two-sided markets. We show that there exist memoryless dynamics that converge to the core of the underlying assignment game in which agents' actions depend only on their current payoff. However, we show that for any such dynamic the convergence time can grow exponentially in relation to the population size. We present a natural dynamic in which a player's reservation value provides a summary of his past information and show that this dynamic converges to the core in polynomial time in homogeneous markets.

Keywords: assignment game; price discovery; information; convergence time (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-gth, nep-mic and nep-mst
Note: View the original document on HAL open archive server: https://hal.science/hal-03100097v1
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Published in Games and Economic Behavior, 2021, 125, pp.62-78. ⟨10.1016/j.geb.2020.11.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03100097

DOI: 10.1016/j.geb.2020.11.002

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