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SUMMARY:Augmenting Markets with Mechanisms - Darrell Duffie\, Standford Gr
 aduate School of Business
DTSTART:20190430T113000Z
DTEND:20190430T130000Z
UID:TALK118516@talks.cam.ac.uk
CONTACT:Emily Brown
DESCRIPTION:We model a market in which traders lay off their excess invent
 ories of an asset in a sequence of size-discovery sessions and on a contin
 uously operating exchange. Taking the exchange as given\; we derive a size
 -discovery mechanism that efficiently reallocates the asset across traders
  at each session. Between sessions\, in a dynamic exchange double-auction 
 market\, traders strategically lower their price impacts by shading their 
 bids\, causing socially costly delays in re-balancing the asset across tra
 ders. As the expected frequency of size-discovery sessions is increased\, 
 exchange market depth is further lowered\, offsetting the efficiency gains
  of the size-discovery sessions. Adding size-discovery sessions to the exc
 hange market has no social value\, beyond that of a potential initialiSing
  session. If\, as in practice\, size-discovery sessions rely on price info
 rmation from the exchange to set the terms of trade\, then bidding incenti
 ves are further weakened\, strictly reducing overall market efficiency.
LOCATION:LT1\, Cambridge Judge Business School
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