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Strategic Trading and Learning About Liquidity

Rady, Sven - 2009

dilemma because of incomplete information about time-varying market liquidity. Unlike the competitive market makers that they … trade against, informed traders do not know whether the liquidity (quot;noisequot;) trades are generated from a distribution … with high or low variance. Instead, they have to learn about liquidity from past prices and trading volume. Extreme price …

Persistent link: https://www.econbiz.de/10012722229

Breakdowns

Keller, Godfrey; Rady, Sven - Volkswirtschaftliche Fakultät, … - 2012

We study a continuous-time game of strategic experimentation in which the players try to assess the failure rate of some new equipment or technology. Breakdowns occur at the jump times of a Poisson process whose unknown intensity is either high or low. In marked contrast to existing models, we...

Persistent link: https://www.econbiz.de/10010860230

Experimentation in Two-Sided Markets

Peitz, Martin; Rady, Sven; Trepper, Piers - Abteilung für Volkswirtschaftslehre, Universität Mannheim - 2013

We study optimal experimentation by a monopolistic platform in a two-sided mar- ket. The platform provider faces uncertainty about the strength of the externality each side is exerting on the other. It maximizes the expected present value of its profit stream in a continuous-time...

Persistent link: https://www.econbiz.de/10010904015

Strongly Symmetric Equilibria in Bandit Games

Hörner, Johannes; Klein, Nicolas; Rady, Sven - Volkswirtschaftliche Fakultät, … - 2014

This paper studies strongly symmetric equilibria (SSE) in continuous-time games of strategic experimentation with Poisson bandits. SSE payoffs can be studied via two functional equations similar to the HJB equation used for Markov equilibria. This is valuable for three reasons. First, these...

Persistent link: https://www.econbiz.de/10010904041

Experimentation in Two-Sided Markets

Peitz, Martin; Rady, Sven; Trepper, Piers - CESifo - 2015

We study optimal experimentation by a monopolistic platform in a two-sided market. The platform provider is uncertain about the strength of the externality each side is exerting on the other. Setting participation fees on both sides, it gradually learns about these externalities by observing...

Persistent link: https://www.econbiz.de/10011277185

Experimentation in Two-Sided Markets

Peitz, Martin; Rady, Sven; Trepper, Piers - Volkswirtschaftliche Fakultät, … - 2011

We study optimal experimentation by a monopolistic platform in a two-sided market framework. The platform provider faces uncertainty about the strength of the externality each side is exerting on the other. It maximizes the expected present value of its profit stream in a continuous-time...

Persistent link: https://www.econbiz.de/10009369590

Strategic Experimentation with Exponential Bandits

Cripps, Martin William; Keller, R Godfrey; Rady, Sven - C.E.P.R. Discussion Papers - 2003

This Paper studies a game of strategic experimentation with two-armed bandits whose risky arm might yield a pay-off only after some exponentially distributed random time. Because of free-riding, there is an inefficiently low level of experimentation in any equilibrium where the players use...

Persistent link: https://www.econbiz.de/10005124141

Strategic Experimentation with Undiscounted Bandits

Keller, Godfrey; Rady, Sven - Society for Economic Dynamics - SED - 2005

Persistent link: https://www.econbiz.de/10005090817

Strategic Experimentation with Poisson Bandits

Keller, Godfrey; Rady, Sven - Volkswirtschaftliche Fakultät, … - 2009

We study a game of strategic experimentation with two-armed bandits where the risky arm distributes lump-sum payoffs according to a Poisson process. Its intensity is either high or low, and unknown to the players. We consider Markov perfect equilibria with beliefs as the state variable. As the...

Persistent link: https://www.econbiz.de/10005105639

Market experimentation in a dynamic differentiated-goods duopoly

Keller, Godfrey; Rady, Sven - London School of Economics (LSE) - 1999

We study the evolution of prices in a symmetric duopoly where firms are uncertain about the degree of product differentiation. Customers sometimes perceive the products as close substitutes, sometimes as highly differentiated. Firms learn about their competitive environment from the quantities...

Persistent link: https://www.econbiz.de/10010746441