This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

« Back to Results

Information in Networked Markets

Paper Session

Friday, Jan. 5, 2018 10:15 AM - 12:15 PM

Marriott Philadelphia Downtown, Meeting Room 410
Hosted By: Econometric Society
  • Chair: Marzena Joanna Rostek, University of Wisconsin-Madison

Information and Interaction

Dirk Bergemann
,
Yale University
Tibor Alejandro Heumann
,
Princeton University
Stephen Morris
,
Princeton University

Abstract

We study a linear interaction model with asymmetric information. We first characterize the linear Bayes Nash equilibrium for a class of one dimensional signals. It is then shown that this class of one dimensional signals provide a comprehensive description of the first and second moments of the distribution of outcomes for any Bayes Nash equilibrium and any information structure.

We use our results in a variety of applications. We study the connections between incomplete information and strategic interaction, we explain to what extent payoff environment and
information structure of a economy are distinguishable through the equilibrium outcomes of the economy and we analyze how equilibrium outcomes can be decomposed to understand the sources of individual and aggregate volatility.

On Fragmented Markets

Ahmad Peivandi
,
Georgia State University
Rakesh Vohra
,
University of Pennsylvania

Abstract

Centralized markets reduce the costs of search for buyers and sellers. Their
`thickness' increases the chance of order execution at competitive prices. In spite
of the incentives to consolidate, some markets, securities markets being the most
notable, have fragmented into multiple trading venues. We argue
that fragmentation is an unavoidable feature of any centralized exchange except
in certain special circumstances

Integration and Segregation

Sanjeev Goyal
,
University of Cambridge

Abstract


This paper studies the relation between two deeply held values: social cohesion and the freedom of association. We consider a setting in which individuals choose their partners and also choose a norm of behavior. Individuals prefer to coordinate with everyone, but they differ on their preferred action for coordination. Our theoretical analysis suggests that such a society could be integrated (with every player conforming to the same action) or segregated (with members of different groups choosing diverse actions). Social welfare is maximum when society is integrated and everyone conforms on the majority's action. In laboratory experiments we observe that individuals with different preferences segregate into distinct groups and choose diverse actions. To understand the role of partner choice, we then consider a setting with an exogenous network of partners. Subjects in the experiment now almost always choose to conform on the action preferred by the majority.
\end{abstract}

Quadratic Games

Nicolas Lambert
,
Stanford University
Giorgio Martini
,
Stanford University
Michael Ostrovsky
,
Stanford University

Abstract

We study general quadratic games with multi-dimensional actions, stochastic payoff interactions, and rich information structures. We first consider games with arbitrary finite information structures. In such games, we show that there generically exists a unique equilibrium. We then extend the result to games with possibly infinite information structures, under an additional assumption of linearity of certain conditional expectations. In that case, there generically exists a unique linear equilibrium. In both cases, the equilibria can be explicitly characterized in closed form. We illustrate our framework by studying information aggregation in large asymmetric Cournot markets and by considering the effects of stochastic payoff interactions in beauty contest games. Our results apply to general games with linear best responses, and also allow us to characterize the effects of small perturbations in arbitrary Bayesian games with finite information structures and smooth payoffs.
Discussant(s)
William Fuchs
,
University of Texas-Austin and University Carlos III of Madrid
Alireza Tahbaz-Salehi
,
Columbia University
Sevgi Yuksel
,
University of California-Santa Barbara
Tibor Alejandro Heumann
,
Princeton University
JEL Classifications
  • D85 - Network Formation and Analysis: Theory