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We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed…
Prediction markets are long known for prediction accuracy. This study systematically explores the fundamental properties of prediction markets, addressing questions about their information aggregation process and the factors contributing to…
Inheritances, divorces or liquidations of companies require common assets to be divided among the entitled parties. Legal methods usually consider the market value of goods, while fair division theory takes into account the parties'…
The goal of an auction is to determine commodity prices such that all participants are perfectly happy. Such a solution is called a competitive equilibrium and does not exist in general. For this reason we are interested in solutions which…
In many first-price auctions, bidders face considerable strategic uncertainty: They cannot perfectly anticipate the other bidders' bidding behavior. We propose a model in which bidders do not know the entire distribution of opponent bids…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
We initiate the study of how auction design affects the division of surplus among buyers. We propose a parsimonious measure for equity and apply it to the family of standard auctions for homogeneous goods. Our surplus-equitable mechanism is…
Duality of linear programming is a standard approach to the classical weighted maximum matching problem. From an economic perspective, the dual variables can be regarded as prices of products and payoffs of buyers in a two-sided matching…
We discuss bundle auctions within the framework of an integer allocation problem. We show that for multi-unit auctions, of which bundle auctions are a special case, market equilibrium and constrained market equilibrium are equivalent…
Data is the central commodity of the digital economy. Unlike physical goods, it is non-rival, replicable at near-zero cost, and traded under heterogeneous licensing rules. These properties defy standard supply--demand theory and call for…
We study a continuous time economy where agents have asymmetric information. The informed agent (``$I$''), at time zero, receives a private signal about the risky assets' terminal payoff $\Psi(X_T)$, while the uninformed agent (``$U$'') has…
This paper focuses on finite-player incomplete information games where players may hold mutually inconsistent beliefs without a common prior. We introduce absolute continuity of beliefs, extending the classical notion of absolutely…
A special case of Myerson's classic result describes the revenue-optimal equilibrium when a seller offers a single item to a buyer. We study a repeated sales extension of this model: a seller offers to sell a single fresh copy of an item to…
We consider a class of two-player dynamic stochastic nonzero-sum games where the state transition and observation equations are linear, and the primitive random variables are Gaussian. Each controller acquires possibly different dynamic…
Bidding in simultaneous auctions is challenging because an agent's value for a good in one auction may depend on the uncertain outcome of other auctions: the so-called exposure problem. Given the gap in understanding of general simultaneous…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
We study the impacts of incomplete information on centralized one-to-one matching markets. We focus on the commonly used Deferred Acceptance mechanism (Gale and Shapley, 1962). We show that many complete-information results are fragile to a…
We introduce a new microeconomics foundation of a specific type of competitive market equilibrium that can be used to study several markets with information asymmetry such as commodity market, credit market, and insurance market.
The problem of arriving at a principled method of pricing goods and services was very satisfactorily solved for conventional goods; however, this solution is not applicable to digital goods. This paper studies pricing of a special class of…