{"title":"Market Microstructure and Informational Complexity","authors":"Rafael R. Guthmann, Brian C. Albrecht","doi":"10.1111/jpet.70114","DOIUrl":null,"url":null,"abstract":"<div>\n \n <p>Competitive markets feature minimal informational complexity; agents only need to know prices to implement an efficient allocation. However, the standard formulation of competitive equilibrium neglects the mechanism of price formation, treating prices as exogenous. Here, we study explicit price formation mechanisms: trade intermediated by market-makers and trade via search and bargaining. We find that as the number of types in the economy grows, the informational complexity of random search diverges to infinity relative to the competitive market. This divergence can be avoided if market makers intermediate trade. Thus, this analysis provides a novel rationale for organized markets if agents' capacity to manage informational complexity is bounded.</p>\n </div>","PeriodicalId":47024,"journal":{"name":"Journal of Public Economic Theory","volume":"28 3","pages":""},"PeriodicalIF":0.9000,"publicationDate":"2026-05-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Public Economic Theory","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/jpet.70114","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Competitive markets feature minimal informational complexity; agents only need to know prices to implement an efficient allocation. However, the standard formulation of competitive equilibrium neglects the mechanism of price formation, treating prices as exogenous. Here, we study explicit price formation mechanisms: trade intermediated by market-makers and trade via search and bargaining. We find that as the number of types in the economy grows, the informational complexity of random search diverges to infinity relative to the competitive market. This divergence can be avoided if market makers intermediate trade. Thus, this analysis provides a novel rationale for organized markets if agents' capacity to manage informational complexity is bounded.
期刊介绍：
As the official journal of the Association of Public Economic Theory, Journal of Public Economic Theory (JPET) is dedicated to stimulating research in the rapidly growing field of public economics. Submissions are judged on the basis of their creativity and rigor, and the Journal imposes neither upper nor lower boundary on the complexity of the techniques employed. This journal focuses on such topics as public goods, local public goods, club economies, externalities, taxation, growth, public choice, social and public decision making, voting, market failure, regulation, project evaluation, equity, and political systems.
求助内容：
应助结果提醒方式：
京公网安备 11010802042870号
