American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Repeated Trading: Transparency and Market Structure
American Economic Review
(pp. 2388–2435)
Abstract
We analyze the effect of transparency of past trading volumes in markets where an informed long-lived seller can repeatedly trade with short-lived uninformed buyers. Transparency allows buyers to observe previously sold quantities. In markets with intraperiod monopsony (single buyer each period), transparency reduces welfare if the ex ante expected quality is low but improves welfare if the expected quality is high. The effect is reversed in markets with intraperiod competition (multiple buyers each period). This discrepancy in the efficiency implications of transparency is explained by how buyer competition affects the seller's ability to capture rents, which, in turn, influences market screening.Citation
Kaya, Ayça, and Santanu Roy. 2024. "Repeated Trading: Transparency and Market Structure." American Economic Review 114 (8): 2388–2435. DOI: 10.1257/aer.20230114Additional Materials
JEL Classification
- D40 Market Structure, Pricing, and Design: General
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- L15 Information and Product Quality; Standardization and Compatibility