Repeated Trading: Transparency and Market Structure

Ayça Kaya and Santanu Roy

No 2301, Departmental Working Papers from Southern Methodist University, Department of Economics

Abstract: We analyze the effect of transparency of past trading volumes in markets where an informed long-lived seller can repeatedly trade with short-lived uninformed buyers. Transparency allows buyers to observe previously sold quantities. In markets with intra-period monopsony (single buyer each period), transparency reduces welfare if the ex-ante expected quality is low, but improves welfare if the expected quality is high. The effect is reversed in markets with intra-period competition (multiple buyers each period). This discrepancy in the efficiency implications of transparency is explained by how buyer competition affects the seller's ability to capture rents, which, in turn, influences market screening.

Keywords: Repeated sales; adverse selection; transparency; competition; market efficiency (search for similar items in EconPapers)
JEL-codes: C73 D61 D82 (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth and nep-mic
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Journal Article: Repeated Trading: Transparency and Market Structure (2024)
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