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Memory and Markets

Sergey Kovbasyuk and Giancarlo Spagnolo

No 415, CEIS Research Paper from Tor Vergata University, CEIS

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.

Keywords: Limited records; rating systems; credit registers; privacy; data retention; online reputation mechanisms; market experimentation (search for similar items in EconPapers)
JEL-codes: D53 D82 G20 G28 K35 L14 L15 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2017-12-07, Revised 2017-12-07
New Economics Papers: this item is included in nep-com, nep-law and nep-pay
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Working Paper: Memory and Markets (2017) Downloads
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