Observational Learning with Competitive Prices
Will people eventually learn the value of an asset through observable information? This paper studies observational learning in a market with competitive prices. Comparing a market with public signals and a market with private signals in a sequential trading model, we find that Pairwise Informativeness (PI) is the sufficient and necessary learning condition for a market with public signals; and Avery and Zemsky Condition (AZC) is the sufficient and necessary learning condition for a market with private signals. Moreover, when the number of states is 2 or 3, PI and AZC are equivalent. And when the number of states is greater than 3, PI and Monotonic Likelihood Ratio Property (MLRP) together imply asymptotic learning in the private signal case.
Code (0)
등록된 구현이 없습니다.
Tasks
InformativenessSimilar Papers 제목 키워드 기반
Misspecified Estimate-then-Optimize Leads to Supra-Competitive Prices
We study whether simple algorithmic pricing systems can systematically produce collusive-like prices in multi-firm markets. We consider firms that price using a myopic estimate-then-optimize rule: each repeatedly fits a …
Competitive equilibrium and the double auction
In this paper, we revisit the common claim that double auctions necessarily generate competitive equilibria. We begin by observing that competitive equilibrium has some counterintuitive implications: specifically, it pre…
Should Demand Models Incorporate Competitor Prices? Oblivious Learning and Algorithmic Collusion
On a platform with many sellers, should a pricing algorithm explicitly model competitors' prices when learning demand? Classical learning arguments suggest an affirmative answer: ignoring competitors induces model misspe…
Algorithmic Collusion Without Threats
There has been substantial recent concern that pricing algorithms might learn to ``collude.'' Supra-competitive prices can emerge as a Nash equilibrium of repeated pricing games, in which sellers play strategies which th…
Competitive Markets with Imperfectly Discerning Consumers
We develop a market model in which products generate state-dependent potential hidden charges. Firms differ in their ability to realize this potential. Unlike firms, consumers do not observe the state. They try to infer …