March 22, 2019
10:00 AM - 11:00 AM
Title: Information and learning in heterogenous markets
Abstract: This paper studies information aggregation in markets consisting of heterogenous agents. Focusing on uniform-price double auctions, we first characterize how the presence of heterogeneity (e.g., in terms of agents’ trading costs, information precision, or risk attitudes) can shape the information content of prices and hence the market’s informational efficiency. We find that price informativeness decreases with the extent of heterogeneity in the market. We then establish that such reductions in price informativeness can in turn manifest themselves as an informational externality: in the presence of heterogeneity, agents do not internalize the impact of their trading decisions on the information revealed to others via prices. We conclude by exploring the welfare implications of market segmentation in the presence of heterogeneous agents and information leakage. (joint work with Yaarit Even and Xavier Vives)
Bio: Alireza Tahbaz-Salehi is an associate professor of Managerial Economics and Decision Sciences at the Kellogg School of Management, Northwestern University. Prior to joining Kellogg, he was the Daniel W. Stanton Associate Professor of Business at Columbia Business School. His research focuses on the implications of network economies for information aggregation, business cycle fluctuations, and financial stability.