We study efficiency in non-stationary decentralised markets with common-value uncertainty and correlated asset values. There is an equal mass of buyers and sellers and payoffs from trade depend on an aggregate state, which only the sellers know. Buyers and sellers are randomly and anonymously matched in pairs over time, and buyers make the offers. We show that all equilibria become efficient as trading frictions vanish.
Efficiency in decentralized markets with aggregate uncertainty
Donato Gerardi
2020-01-01
Abstract
We study efficiency in non-stationary decentralised markets with common-value uncertainty and correlated asset values. There is an equal mass of buyers and sellers and payoffs from trade depend on an aggregate state, which only the sellers know. Buyers and sellers are randomly and anonymously matched in pairs over time, and buyers make the offers. We show that all equilibria become efficient as trading frictions vanish.
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