Centre for Development Economics
Department of Economics
Delhi School of Economics
ANNOUNCE A SEMINAR
Repeated Trading: Transparency and Market Structure
by
Santanu Roy
(Southern Methodist University)
with
Ayça Kaya,
(University of Miami)
July 21, Thursday Time: 3:05 PM
Venue: AMEX Room
Abstract:-
We analyze the effect of transparency of past trading outcomes in markets with incomplete information. A long lived seller who can sell every period and has private information about product quality receives offers from short lived uninformed buyers. Transparency allows buyers to observe the quantities sold in previous periods. When the market is characterized by high monopsony power in every period, transparency reduces welfare and efficiency if the ex ante expected quality is low, but improves welfare and efficiency when the expected quality is high. The effect is exactly the reverse when the market is characterized by intra-period competition among multiple buyers; transparency increases (reduces) efficiency and welfare when the expected quality is low (high). Thus, when the prior belief about quality is adverse, competition makes transparency socially desirable but when the beliefs are better, it is the lack of competition that provides the rationale for improving market transparency. Competition generates more learning (finer screening) relative to monopsony when the market is transparent.