Information Aggregation in Competitive Markets
55 Pages Posted: 19 Jul 2017 Last revised: 15 Dec 2018
Date Written: December 9, 2018
We study when equilibrium prices can aggregate information in a market with a large population of privately informed buyers and sellers. Our main result identifies a property of information--the betweenness property--that is both necessary and sufficient for aggregation. The characterization provides 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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