Learning from trades
- Author(s)
- Eeva Mauring
- Abstract
I study stationary cut-off-strategy equilibria of a dynamic market model where buyers sample sellers sequentially from an unknown distribution. Buyers learn about the distribution from the sampled sellers and a trade signal'. The trade signal reveals whether a randomly chosen seller traded yesterday. Observing a trade (as opposed to no trade) is good news about the distribution. Buyers who observe a trade use a higher cut-off than buyers who observe no trade, despite buyers' learning from sampled sellers that puts a countervailing pressure on the cut-offs. The trade signal may reduce market efficiency, while an appropriate exogenous signal increases efficiency.
- Organisation(s)
- Department of Economics
- Journal
- The Economic Journal
- Volume
- 127
- Pages
- 827-872
- No. of pages
- 46
- ISSN
- 0013-0133
- DOI
- https://doi.org/10.1111/ecoj.12484
- Publication date
- 05-2017
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502021 Microeconomics
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucrisportal.univie.ac.at/en/publications/91078549-a424-4cd8-b53d-b437d869cdf6