Private Information In Market Research Articles

The influence of social network structure on stock price disclosure

We propose a new heterogeneous agent model of a dynamic continuous double auction stock market embedding multiple social network to investigate the influence of different network structures on stock price disclosure. According to the four network formation algorithms (preferential connection, random connection, weighted random connection and random reconnection), we construct scale-free random network, weighted random network and small-world network respectively. We find that the small-world characteristic of social network speed up the diffusion of private information in market, and then improve market efficiency and promote price discovery. Furthermore, to some extent, simulation results indicate that the network structure can explain the occurrence of anomalies like underreaction and overreaction in the financial market.

Private Information in Markets: A Market Design Perspective

This paper studies the impact of heterogeneity in interdependence of trader values on price inference and welfare. A model of double auction with quasilinear-quadratic utilities is introduced that allows for arbitrary Gaussian information structures. With heterogeneous interdependence, some traders learn more from prices whereas others from private signals; thus, heterogeneity separates informed and uninformed trading. Changes in market structure can improve both informativeness of prices and private signals of a trader and make some traders learn more from prices than others. We characterize conditions on the information structure for price and signal inference to involve no tradeoff.

More Information, More Ripoffs: Experiments with Public and Private Information in Markets with Asymmetric Information

It is well known that asymmetric information can be a catalyst for producing a lemons market. What is much less well known is how different institutional arrangements and their concomitant information conditions affect the lemons outcome. We conduct a laboratory experiment to examine the role that two different types of markets—two-sided multilateral negotiations and posted offers—play in an environment with sufficient conditions to yield a lemons outcome. We also investigate the effect that publicly available prices and advertisements have on buyers and sellers in a posted-offer market.

Regional Wage and Price Dynamics

Most regional economic models are based on levels and real balances. For example, firms’ employment decisions are thought to be a function of local relative wages (relative to the wage levels of other places) discounted by local price levels and labor productivity. Such models are based on comparative statics and reduce decision variables to their “real” values, supposedly untainted by monetary effects. This modeling strategy is appropriate if the spatial economic system is at equilibrium. At equilibrium, we do not need to know how the economic system gets from one point to another, or how economic agents are going to respond to changes in the economic environment. These issues are irrelevant in a world that is stable, certain, and complete.’ In a world characterized by disequilibrium, however, different issues arise. It is very important to understand how the economic system adapts and adjusts (Benassy 1982). Levels are not so important as changes, and money effects are very important, rivaling real balances in terms of their influence on output and employment (Tobin 1980). Not only are money variables decision variables, in a world of uncertainty they are also the approximate variables for the underlying economic structure. Once the comfortable world of certainty and equilibrium is left behind, the crucial issue becomes the temporal relationships between variables. In this paper we analyze the temporal relationships between regional money wage and price inflation. Assuming that disequilibrium best characterizes the spatial economy, we also assume that money wages are a crucial behavioral variable, being a proximate measure of labor’s income and firms’ costs. Prices, though also vital, are not so obviously endogenous decision variables. Price inflation *Research reported here was funded in part by a grant from the German Marshall Fund of the United States. The first draft of this pa r was written while Gordon Clark was a guest of the ORL Institute of Eidgenossische Technische Hocgchule, Zurich, Switzerland. Thanks to B. Hotz-Hart, M. Hotz-Hart, and John Whiteman for comments on a previous draft. All opinions and errors, if any, are, of course, those of the authors. ‘Indeed, equilibrium models are singularly ill equipped to handle out-f-equilibrium situations. As Hahn (1973) noted, equilibrium models “make no formal or explicit causal claims at all. Such models] . 7). Both neoclassical economics and some variants of radical economic theories are compromised by $l ese problems.