Information and strategic behavior

• 成果类型: Article
• 署名作者: Rostek, Marzena; Weretka, Marek
• 署名单位: University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2014.12.005
• 发表日期: 2015
• 页码: 536-557
• 关键词: Double auction; Price impact; Price informativeness; rational expectations; market design

摘要

Does encouraging trader participation enhance market competitiveness? This paper shows that, when trader preferences are interdependent, trader market power does not necessarily decrease with greater participation, and traders need not become price takers in large markets. Thus, larger markets can be less liquid and associated with lower ex ante welfare. In the linear-normal model, the necessary and sufficient condition on the information structure is provided under which price impact is monotone in market size. A condition is given when the rational expectations equilibrium, which is typically not fully revealing within the considered class of preference interdependencies, is obtained in large markets. (C) 2015 Elsevier Inc. All rights reserved.