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research article

Information percolation in segmented markets

Duffie, Darrell
•
Malamud, Semyon  
•
Manso, Gustavo
2014
Journal Of Economic Theory

We study equilibria of dynamic over-the-counter markets in which agents are distinguished by their preferences and information. Over time, agents are privately informed by bids and offers. Investors differ with respect to information quality, including initial information precision, and also in terms of market "connectivity," the expected frequency of their bilateral trading opportunities. We characterize endogenous information acquisition and show how learning externalities affect information gathering incentives. More "liquid" markets lead to higher equilibrium information acquisition when the gains from trade and market duration are sufficiently large. On the other hand, for a small market duration, the opposite may occur if agents vary sufficiently in terms of their market connectivity. (C) 2014 Published by Elsevier Inc.

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Type
research article
DOI
10.1016/j.jet.2014.05.006
Web of Science ID

WOS:000342250900001

Author(s)
Duffie, Darrell
Malamud, Semyon  
Manso, Gustavo
Date Issued

2014

Publisher

Elsevier

Published in
Journal Of Economic Theory
Volume

153

Start page

1

End page

32

Subjects

Over-the-counter markets

•

Information transmission

•

Learning

•

Search

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
SFI-SM  
Available on Infoscience
April 13, 2015
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/113077
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