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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/31406

Title: Information Aggregation and Innovation in Market Design
Authors: Ollar, Mariann
Rostek, Marzena Rostek
Keywords: Interdependent values and noise, Network, Link Formation, Innovation, Information Aggregation, Divisible Good Auction, Commonality
Issue Date: 20-Dec-2011
Series/Report no.: NET Institute Working Papers;11_12
Abstract: The literature on information aggregation predicts that market growth unambiguously reduces uncertainty about the value of traded goods. The results were developed within the classical model, which assumes that traders’ values for the exchanged good are determined by fundamental (common) shocks. At the same time, design innovation in contemporaneous markets seems to exploit demand interdependence among agents with similar tastes or common information sharing (e.g., Facebook ads, the practice of customer targeting). This paper demonstrates that with heterogeneous interdependence among agents’ values or noise in signals about values, opportunities to innovate in smaller or less connected (in the network-theoretic sense) markets may dominate those in larger or better connected markets.
URI: http://hdl.handle.net/2451/31406
Appears in Collections:NET Institute Working Papers Series

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