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Alp Atakan (Koc University Turkey)

5 November 2014 @ 12:00

 

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Date:
5 November 2014
Time:
12:00
Event Category:

“Market Selection and the Information Content of Prices”

Abstract

We study a market in which 2k identical and indivisible objects are allocated to z>2k bidders in two separate markets using uniform-price auctions. Before the auctions, each bidder receives an informative but imperfect signal about the state of the world and chooses one of the two markets. The goods that are on auction are common-value objects for the bidders. Our main result shows that if the gains from trade are uncertain in one of the markets, then there is no equilibrium where information is aggregated. In contrast,  if the gains fromtrade are certain in both markets then information is fully aggregated by the prices. Our results highlight how self-selection of bidders into the two markets leads to informational contagion between the markets which in turn hinders information aggregation in both markets.