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Presentation Title: Repeated Trading: Transparency and Market Structure
Abstract:
We analyze the effect of transparency of past trading volumes in markets where an informed long-lived seller can repeatedly trade with short-lived uninformed buyers. Transparency allows buyers to observe the quantities sold in previous periods. When the market features intra-period monopsony (single buyer each period), transparency reduces welfare if the ex ante expected quality is low, but improves welfare if the expected quality is high. The effect is exactly the reverse when the market is characterized by intra-period competition (multiple buyers each period). This discrepancy in the efficiency implications of transparency is explained by how buyer competition affects the seller’s ability to capture rents, which, in turn, influences market screening.
Contact Michèle Müller-Itten for information.