------------------------------------------------------------ ----------------- A v v i s o d i S e m i n a r i o ------------------------------------------------------------ ----------------- Martedì 11 Aprile, ore 9,30 ------------------------------------------------------------ -----------------
Aula Fermi Scuola Normale Superiore, Piazza dei Cavalieri 7, Pisa
Prof. Giulia Iori (City University, London)
Information aggregation in Decentralized Markets: An Experimental Study
*Abstract:* The aim of the paper is to explore the effects of market opacity and trade frictions, on market efficiency and social welfare, in exchanges organized by decentralized trade. Networks are a natural tool to represent the trading relationships among market participants in decentralized markets. By constraining exchanges on exogenously predetermined networks, and without altering the price formation mechanism, which is based on the networked limit order book technology, we can span from highly decentralized to fully connected double auction markets. Via laboratory experiments with human subjects we investigate how the density of the trading network affects the market overreaction to the release of public information, the way asymmetric private information is aggregated into prices, the manner in which the price negotiated on a particular trade reflects the relative degree of connectedness of the buyer and seller, and the extent to which location advantages create heterogeneities in gains from trading among traders.
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Fabrizio Lillo
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