The importance of memory for price discovery in decentralized markets

Jacob D Leshno (1) , Bary S R Pradelski (2)

1 Booth School of Business [Chicago]
2 POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems

We study the dynamics of price discovery in decentralized two-sided markets. We show that there exist memoryless dynamics that converge to the core of the underlying assignment game in which agents' actions depend only on their current payoff. However, we show that for any such dynamic the convergence time can grow exponentially in relation to the population size. We present a natural dynamic in which a player's reservation value provides a summary of his past information and show that this dynamic converges to the core in polynomial time in homogeneous markets.

Mots clés: assignment game; price discovery; information; convergence time

Domaines: Economies et finances

Jacob D Leshno, Bary S R Pradelski. The importance of memory for price discovery in decentralized markets. Games and Economic Behavior, 2021, 125, pp.62-78. ⟨10.1016/j.geb.2020.11.002⟩. ⟨hal-03100097⟩