PROFESSOR ALP ATAKAN

Economics, College of Administrative Sciences and Economics

ERC Consolidator Grant 2015

InformativePrices: Market Selection, Frictions and the Information Content of Prices

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Prof. Atakan’s ERC action is a study on information aggregation in multiple-linked auction markets with large numbers of goods and bidders. While past work assumes bidders trade in a single, centralized, frictionless auction market, Prof. Atakan focuses on bidders with unit demand who decide to purchase one of many possible goods which are on auction in distinct markets. The goods traded in each market are identical, common-value objects and the price is determined by a uniform-price auction. Bidders receive imperfect signals about the state of the world and select to bid in one of the auction markets. The markets differ in institutional structure and therefore frictions. Market frictions result from imperfect competition, government interventions, informational frictions, and preference heterogeneity. All such frictions render the gains from trade uncertain.

INFORMATIVEPRICES asks:

• How do market frictions affect information aggregation if bidders can strategically choose between markets?
• What are the mechanisms through which market imperfections disrupt information aggregation?
• Which market’s price is a better statistic for market participants’ information?
• Which market attracts better-informed bidders? Do prices aggregate beliefs more accurately in good times or in bad?

Prof. Atakan carried out the project in collaboration with Queen Mary University of London.