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Repeated Trading: Transparency and Market Structure

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  • Ayça Kaya
  • Santanu Roy

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 previously sold quantities. In markets with intraperiod 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 reversed in markets with intraperiod 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.

Suggested Citation

  • Ayça Kaya & Santanu Roy, 2024. "Repeated Trading: Transparency and Market Structure," American Economic Review, American Economic Association, vol. 114(8), pages 2388-2435, August.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:8:p:2388-2435
    DOI: 10.1257/aer.20230114
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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