Cornell University

Joint Microeconomic Theory & Computer Science Workshop: Alireza Tahbaz-Salehi

Monday, March 19, 2018 at 4:15pm

Uris Hall, 498
Central Campus

Alireza Tahbaz-Salehi - Northwestern University

Efficiency and Information Aggregation in Heterogeneous Markets (joint w/Yaarit Even & Xavier Vives)

Abstract: This paper studies how heterogeneous preferences shape the informational and allocative efficiency of centralized markets with asymmetric information. We start by showing that introducing agent-level heterogeneity (e.g., in terms of trading costs) to the standard rational expectations equilibrium models reduces price informativeness by creating a bias towards the private information of agents with smaller trading costs. We then establish that this reduction in price informativeness in turn manifests itself as an informational externality: agents do not internalize the impact of their trading decisions on the information revealed to others via prices, even in competitive markets. We conclude the paper by investigating the welfare implications of market segmentation in the presence of this heterogeneity-induced informational externality.

Event Type

Seminar, Class/ Workshop

Departments

Economics

Tags

economics, EconSeminar, EconMicro

Hashtag

#CornellEcon

Contact E-Mail

alg5@cornell.edu

Contact Name

Amy Moesch

Contact Phone

(607)255-5617

Speaker

Alireza Tahbaz-Salehi

Speaker Affiliation

Northwestern University, Kellogg

Open To

Cornell Economics Community (List Serve Members)

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