TY  - JOUR
AU  - Golosov,Mikhail
AU  - Lorenzoni,Guido
AU  - Tsyvinski,Aleh
TI  - Decentralized Trading with Private Information
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15513
PY  - 2009
Y2  - November 2009
UR  - http://www.nber.org/papers/w15513
L1  - http://www.nber.org/papers/w15513.pdf
N1  - Author contact info:
Mikhail Golosov
Department of Economics
Princeton University
111 Fisher Hall
Princeton, NJ 08544
Tel: 609/258-4003
Fax: 609/258-6419
E-Mail: golosov@princeton.edu

Guido Lorenzoni
MIT Department of Economics
E52-251C
50 Memorial Drive
Cambridge, MA 02142-1347
Tel: 617/253-4836
Fax: 617/253-1330
E-Mail: glorenzo@mit.edu

Aleh Tsyvinski
Department of Economics
Yale University
Box 208268
New Haven, CT  06520-8268
E-Mail: a.tsyvinski@yale.edu
AB  - The paper studies asset pricing in informationally decentralized markets. These markets have two key frictions: trading is decentralized (bilateral), and some agents have private information. We analyze how uninformed agents acquire information over time from their bilateral trades. In particular, we show that uninformed agents can learn all the useful information in the long run and that the long-run allocation is Pareto efficient. We then explore how informed agents can exploit their informational advantage in the short run and provide sufficient conditions for the value of information to be positive. Finally, we provide a numerical analysis of the equilibrium trading dynamics and prices.
ER  -