The importance of memory for price discovery in decentralized markets

International audienceWe 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

An Approximate "Law of One Price" in Random Assignment Games

Assignment games represent a tractable yet versatile model of two-sided markets with transfers. We study the likely properties of the core of randomly generated assignment games. If the joint productivities of every firm and worker are i.i.d bounded random variables, then with high probability all workers are paid roughly equal wages, and all firms make similar profits. This implies that core allocations vary significantly in balanced markets, but that there is core convergence in even slightly unbalanced markets. For the benchmark case of uniform distribution, we provide a tight bound for the workers' share of the surplus under the firm-optimal core allocation. We present simulation results suggesting that the phenomena analyzed appear even in medium-sized markets. Finally, we briefly discuss the effects of unbounded distributions and the ways in which they may affect wage dispersion

Centrality metrics and localization in core-periphery networks

Two concepts of centrality have been defined in complex networks. The first considers the centrality of a node and many different metrics for it has been defined (e.g. eigenvector centrality, PageRank, non-backtracking centrality, etc). The second is related to a large scale organization of the network, the core-periphery structure, composed by a dense core plus an outlying and loosely-connected periphery. In this paper we investigate the relation between these two concepts. We consider networks generated via the Stochastic Block Model, or its degree corrected version, with a strong core-periphery structure and we investigate the centrality properties of the core nodes and the ability of several centrality metrics to identify them. We find that the three measures with the best performance are marginals obtained with belief propagation, PageRank, and degree centrality, while non-backtracking and eigenvector centrality (or MINRES}, showed to be equivalent to the latter in the large network limit) perform worse in the investigated networks.Comment: 15 pages, 8 figure

Strategic factor markets: Bargaining, scarcity, and resource complementarity

Strategic factor market theory suggests that without luck or asymmetric expectations, firms can't appropriate gains from acquired resources. Adopting the bargaining perspective on resource advantage, we hold that this is only true in the absence of resource complementarity. We extend factor market theory to account for resource complementarity, and we show that firms can profit when they exhibit superior complementarity to target resources, even in the absence of asymmetric expectations. Thus we provide an alternative interpretation of managers' recent emphasis on externally acquired resources.Complementarity; bargain perspective; value appropriation; resource acquisition; asymmetric expectation;

The organization of the interbank network and how ECB unconventional measures affected the e-MID overnight market

The topological properties of interbank networks have been discussed widely in the literature mainly because of their relevance for systemic risk. Here we propose to use the Stochastic Block Model to investigate and perform a model selection among several possible two block organizations of the network: these include bipartite, core-periphery, and modular structures. We apply our method to the e-MID interbank market in the period 2010-2014 and we show that in normal conditions the most likely network organization is a bipartite structure. In exceptional conditions, such as after LTRO, one of the most important unconventional measures by ECB at the beginning of 2012, the most likely structure becomes a random one and only in 2014 the e-MID market went back to a normal bipartite organization. By investigating the strategy of individual banks, we explore possible explanations and we show that the disappearance of many lending banks and the strategy switch of a very small set of banks from borrower to lender is likely at the origin of this structural change.Comment: 33 pages, 5 figure