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Information and Competition (INFOCOMP)
Start date: May 1, 2009, End date: Apr 30, 2014 PROJECT  FINISHED 

The project deals with economies with private information. Despite the growing body of work about economies with dispersed information there are at least three important stumbling blocks in the received literature that prevent scientific progress: lack of understanding of the dynamics of markets involving complementarities and information; consideration of public information as exogenous; and avoidance or extreme simplification of welfare analysis (e.g. because of the lack of a well-defined welfare benchmark and/or the presence of reduced-form un-modeled agents such as noise traders). I plan to contribute to remove these obstacles to progress by developing the theory of games with strategic complementarities and incomplete information; introducing static and dynamic models where public information is endogenous; doing away with noise traders and replacing them by hedgers, and performing a welfare analysis with an appropriate welfare benchmark for private information economies. This will be accomplished by developing a series of models where agents can use complex strategies (such as supply functions or demand schedules) and where dynamics matter. The tools used will involve game theory, information economics, market microstructure analysis, theoretical industrial organization and financial intermediation theory. The potential applications will concentrate mostly on industrial organization, and banking and finance.
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