Information Aggregation in Dynamic Markets with Strategic Traders,” Working Paper (2009)
| Citations: | 12 - 0 self |
BibTeX
@MISC{Ostrovsky09informationaggregation,
author = {Michael Ostrovsky and Yossi Feinberg and Emir Kamenica and Yury Makarychev and Sergey Norin and Rahul Sami and Michael Schwarz and Robert Wilson and Bumin Yenmez},
title = {Information Aggregation in Dynamic Markets with Strategic Traders,” Working Paper},
year = {2009}
}
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Abstract
This paper studies information aggregation in dynamic markets with a finite number of partially informed strategic traders. It shows that for a broad class of securities, information in such markets always gets aggregated. Trading takes place in a bounded time interval, and in every equilibrium, as time approaches the end of the interval, the market price of a “separable” security converges in probability to its expected value conditional on the traders ’ pooled information. If the security is “non-separable, ” then there exists a common prior over the states of the world and an equilibrium such that information does not get aggregated. The class of separable securities includes, among others, Arrow-Debreu securities, whose value is one in one state of the world and zero in all others, and “additive ” securities, whose value can be interpreted as the sum of traders ’ signals.
