We analyze high frequency trading (HFT) activity in equities during U.S. Treasury permanent open market (POMO) purchases by the Federal Reserve. We construct a model to study HFT quote and trade behavior when private information is released and confirm it empirically. We estimate that HFT firms...

The answer is no. Although naive intuition may suggest the opposite, uncertainty about costs in the homogeneous-good Bertrand model intensifies competition: it lowers price and raises total surplus (but also makes profits go up). For some economic environments, this is implied by Hansen’s...

In this paper, we examine the impact of major regulatory changes in New Zealand on the profitability and informational basis of insider transactions. Legislation around the world appears to have tried to encourage insiders to trade only in specified instances. We examine the efficacy of this...

In a beauty contest framework, welfare can decrease with public information if the precision of private information is exogenous, whereas welfare necessarily increases with public information if the precision is endogenous with linear costs of information acquisition. The purpose of this paper...

A central assumption in economics is that people misreport their private information if this is to their material benefit. Several recent models depart from this assumption and posit that some people do not lie or at least do not lie maximally. These models invoke many different underlying...

A central assumption of the canonical cheap talk literature is that people misreport their private information if this is to their material benet. Recent evidence from laboratory experiments with student subjects suggests, however, that while many people do report the payo-maximizing outcome,...

In many social and biological systems, agents compete for limited resources over an extended, connected network, but at any moment compete for resources semi-locally using incomplete, private information. To understand such systems, it is important to understand the nature of competition for...

In this paper we study incentives to report clinically suspect situations in a simple model of an infectious animal disease with limited diagnostic resource. We characterize a transfer scheme that sustains credible reporting and implements an efficient test allocation. In a game without monetary...

This paper studies pricing patterns in a speculative market with asymmetric information populated by both sophisticated and naive traders. Three pricing regimes arise in equilibrium: perfect pricing, with prices equalling asset values, partial mispricing and complete mispricing. Perfect pricing...

This paper studies the incentive effect of linear performance-adjusted contracts in delegated portfolio management under a value-at-risk (VaR) constraint. It is shown that a linear performance-based contract can provide incentives for the portfolio manager to work at acquiring private...