IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v91y2024i3p1775-1806..html
   My bibliography  Save this article

Memory and Markets

Author

Listed:
  • Sergey Kovbasyuk
  • Giancarlo Spagnolo

Abstract

In many environments, including credit and online markets, records about participants are collected, published, and erased after some time. We study the effects of erasing past records in a dynamic market where the quality of sellers follows a Markov process, and buyers leave feedback about sellers to an information intermediary. When the average quality of sellers is low, unlimited records lead to a market breakdown in the long run. We consider the information design problem and characterize information policies that can sustain trade and that maximize social welfare. These policies hide some information from the market in order to foster socially desirable experimentation. We show that these outcomes can be implemented by appropriately deleting past records. Crucially, positive and negative records play opposite roles with different intensities and must have different lengths: negative records must be deleted sufficiently late, and positive ones sufficiently early.

Suggested Citation

  • Sergey Kovbasyuk & Giancarlo Spagnolo, 2024. "Memory and Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(3), pages 1775-1806.
  • Handle: RePEc:oup:restud:v:91:y:2024:i:3:p:1775-1806.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/restud/rdad067
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:91:y:2024:i:3:p:1775-1806.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/restud .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.