Private Information in Markets: A Market Design Perspective

Marzena Rostek () and Ji Hee Yoon ()
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Marzena Rostek: University of Wisconsin-Madison Economics Department
Ji Hee Yoon: University of Wisconsin-Madison Economics Department

No 13-21, Working Papers from NET Institute

Abstract: This paper studies the impact of heterogeneity in interdependence of trader values on price inference and welfare. A model of double auction with quasilinear-quadratic utilities is introduced that allows for arbitrary Gaussian information structures. With heterogeneous interdependence, some traders learn more from prices whereas others from private signals; thus, heterogeneity separates informed and uninformed trading. Changes in market structure can improve both informativeness of prices and private signals of a trader and make some traders learn more from prices than others. We characterize conditions on the information structure for price and signal inference to involve no tradeoff.

Keywords: Price Inference; Networks; Dark Pools; Market Design (search for similar items in EconPapers)
JEL-codes: D43 D53 G11 G12 L13 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2013-09
New Economics Papers: this item is included in nep-cta and nep-mst
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