Aggregation and design of information in asset markets with adverse selection

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• dc.contributor.author Asriyan, Vladimir
• dc.contributor.author Fuchs, William
• dc.contributor.author Green, Brett
• dc.date.accessioned 2021-03-23T09:03:47Z
• dc.date.available 2021-03-23T09:03:47Z
• dc.date.issued 2021
• dc.description.abstract How effectively does a decentralized marketplace aggregate information that is dispersed throughout the economy? We study this question in a dynamic setting where sellers have private information that is correlated with an unobservable aggregate state. In any equilibrium, each seller's trading behavior provides an informative and conditionally independent signal about the aggregate state. We ask whether the state is revealed as the number of informed traders grows large. Surprisingly, the answer is no; we provide conditions under which information aggregation necessarily fails. In another region of the parameter space, aggregating and non-aggregating equilibria coexist. We solve for the optimal information policy of a social planner who observes trading behavior. We show that non-aggregating equilibria are always constrained inefficient. The optimal information policy Pareto improves upon the laissez-faire outcome by concealing information about trading volume when it is sufficiently high.en
• dc.description.sponsorship Asriyan acknowledges financial support from the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563) and Juan de la Cierva (IJCI-2017-31808), and from the Generalitat de Catalunya AGAUR Grant (SGR 2017-1393). Fuchs acknowledges support from the ERC Grant 681575.
• dc.format.mimetype application/pdf
• dc.identifier.citation Asriyan V, Fuchs W, Green B. Aggregation and design of information in asset markets with adverse selection. J Econ Theory. 2021 Jan;191:105124. DOI: 10.1016/j.jet.2020.105124
• dc.identifier.doi http://dx.doi.org/10.1016/j.jet.2020.105124
• dc.identifier.issn 0022-0531
• dc.identifier.uri http://hdl.handle.net/10230/46897
• dc.language.iso eng
• dc.publisher Elsevier
• dc.relation.ispartof Journal of Economic Theory. 2021 Jan;191:105124
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/SEV-2015-0563
• dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/IJCI-2017-31808
• dc.relation.projectID info:eu-repo/grantAgreement/EC/FP7/681575
• dc.rights This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/4.0/
• dc.subject.keyword Information aggregationen
• dc.subject.keyword Information designen
• dc.subject.keyword Decentralized marketsen
• dc.subject.keyword Adverse selectionen
• dc.subject.keyword Optimal information policyen
• dc.subject.keyword Transparencyen
• dc.title Aggregation and design of information in asset markets with adverse selectionen
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/publishedVersion