We explore the effects of information propagation in a centralized financialmarket. Specifically, we embed search frictions within the Grossman andStiglitz (1980) framework, relying on information percolation as modeled inDuffie, Malamud, and Manso (2009). First, we show that information...

Our purpose is to show how large difference of beliefs induced by fear of crashesis amenable to large and persistent price responses to contemporaneous shocks. Weconstruct a pure exchange economy populated by two agents who estimate strictlydifferent models regarding the fundamental. In...