Informational cycles in search markets
By: Mauring, Eeva
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Material type: 
BookPublisher: American Economic Journal: Microeconomics Description: 12(4), Nov, 2020: p.170-192.Subject(s): Asymmetric and private information; Mechanism design
In:
American Economic Journal: MicroeconomicsSummary: I show that market participants' equilibrium beliefs can create fluctuations in the volume of trading, even in a stationary environment. I study a sequential search model where buyers face an unknown distribution of offers. Each buyer learns about the distribution by observing whether a randomly chosen buyer traded yesterday. A cyclical equilibrium exists where the informational content of observing a trade fluctuates, which leads to fluctuations in the volume of trading. The cyclical equilibrium is more efficient than steady-state equilibria. The efficiency result holds also if buyers get a signal about past transaction prices or past trading volumes. – Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 12(4), Nov, 2020: p.170-192 | Available | AR124475 |
I show that market participants' equilibrium beliefs can create fluctuations in the volume of trading, even in a stationary environment. I study a sequential search model where buyers face an unknown distribution of offers. Each buyer learns about the distribution by observing whether a randomly chosen buyer traded yesterday. A cyclical equilibrium exists where the informational content of observing a trade fluctuates, which leads to fluctuations in the volume of trading. The cyclical equilibrium is more efficient than steady-state equilibria. The efficiency result holds also if buyers get a signal about past transaction prices or past trading volumes. – Reproduced
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