1. Inicio keyboard_arrow_right
  2. Investigación keyboard_arrow_right
  3. Information, Market Power and Price Volatility


Artículo en revista académica

Information, Market Power and Price Volatility

  • person Tibor Heumann

    Dirk Bergemann; Stephen Morris

  • class The Rand Journal of Economics, Volume 52, Issue 1, Spring 2021, Pages 125-150

Abstract: We consider demand function competition with a finite number of agents and private information. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. In particular, regardless of the number of agents and the correlation of payo§ shocks, market power may be arbitrarily close to zero (so we obtain the competitive outcome) or arbitrarily large (so there is no trade in equilibrium). By contrast, price volatility is always less than the
variance of the aggregate shock across all information structures.

Jel Classification: C72, D43, D44, D83, G12.
Keywords: Demand Function Competition, Supply Function Competition, Price Impact, Market Power, Incomplete Information, Price Volatility