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We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. When quotes are observable, this effect in turn induces a strategic...
Persistent link: https://www.econbiz.de/10012854920
Consider an investment problem with strategic complementarities and incomplete information about returns. This paper shows that investors aggregate their private information in equilibrium by trading a token and observing its market price over multiple rounds before making the investment...
Persistent link: https://www.econbiz.de/10014239114
We propose an equivalent formulation of a two player information design problem in terms of choosing a copula, as opposed to choosing a joint distribution of a signal and the state variable. We then propose a copula based signal ordering which is both necessary and sufficient for the more...
Persistent link: https://www.econbiz.de/10013217008
The psychology literature provides ample evidence that people have difficulties taking the perspective of less-informed others. This paper presents a controlled experiment showing that this "curse of knowledge" can cause comparative overconfidence and overentry into competition. In a broader...
Persistent link: https://www.econbiz.de/10010403249
In prediction markets, investors trade assets whose values are contingent on the occurrence of future events, like election outcomes. Prediction market prices have been shown to be consistently accurate forecasts of these outcomes, but we don't know why. I formally illustrate an information...
Persistent link: https://www.econbiz.de/10011490362
In prediction markets, investors trade assets whose values are contingent on the occurrence of future events, like election outcomes. Prediction market prices have been shown to be consistently accurate forecasts of these outcomes, but we don't know why. I formally illustrate an information...
Persistent link: https://www.econbiz.de/10011492072
We study markets for information in the form of Bayesian signals. The main feature of such markets is that information is costly for the seller to acquire and cannot be verified by the buyer. We provide a full characterization of the set of all compensation schemes (viz., menus) which guarantee...
Persistent link: https://www.econbiz.de/10012837761
We study the informational role of prices. To that end, we consider the framework of a dominant firm with a competitive fringe. When the competitive fringe is large enough, there exists a unique fully revealing equilibrium, in which the price conveys full information about the quality of the...
Persistent link: https://www.econbiz.de/10012976764
We consider a security design problem where public information about the security's underlying cash-flow arrives between trading periods. The optimal security minimizes less-than-full realization of gains from trade due to limited cash in the market, which may depend on the interim information....
Persistent link: https://www.econbiz.de/10013007627
Many stock exchanges implement advanced procedures toward preventing manipulative orders from distorting informative price discovery during preopening sessions. Often, such sessions involve both the stock and options markets, with book-based indicative stock prices and traded index options,...
Persistent link: https://www.econbiz.de/10012937969