Information Aggregation and Innovation in Market Design

Mariann Ollar and Marzena Rostek ()
Additional contact information
Mariann Ollar: Department of Economics, University of Wisconsin-Madison, http://www.econ.wisc.edu
Marzena Rostek: Department of Economics, University of Wisconsin-Madison, http://www.ssc.wisc.edu/~mrostek

No 11-12, Working Papers from NET Institute

Abstract: The literature on information aggregation predicts that market growth unambiguously reduces uncertainty about the value of traded goods. The results were developed within the classical model, which assumes that traders’ values for the exchanged good are determined by fundamental (common) shocks. At the same time, design innovation in contemporaneous markets seems to exploit demand interdependence among agents with similar tastes or common information sharing (e.g., Facebook ads, the practice of customer targeting). This paper demonstrates that with heterogeneous interdependence among agents’ values or noise in signals about values, opportunities to innovate in smaller or less connected (in the network-theoretic sense) markets may dominate those in larger or better connected markets.

Keywords: Interdependent values and noise; Network; Link Formation; Innovation; Information Aggregation; Divisible Good Auction; Commonality (search for similar items in EconPapers)
JEL-codes: D44 D82 G14 L13 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2011-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.netinst.org/Ollar_Rostek_11_12.pdf (application/pdf)
no

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:1112

Access Statistics for this paper

More papers in Working Papers from NET Institute
Bibliographic data for series maintained by Nicholas Economides ().