Information Aggregation in Competitive Markets
44 Pages Posted: 19 Jul 2017 Last revised: 29 Jun 2020
Date Written: June 27, 2020
We study when equilibrium prices can aggregate information in an auction market with a large population of traders. Our main result identifies a property of information—the betweenness property that is both necessary and sufficient for information aggregation. The characterization provides novel predictions about equilibrium prices in complex, multidimensional environments.
Keywords: Auction, Betweenness, Competitive Markets, Information Aggregation, Rational Expectations Equilibrium
JEL Classification: C72, D44, D82, D83, G14
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