The literature on information aggregation predicts that market growth
unambiguously reduces uncertainty about the value of traded goods. The
results were developed within the classical model, which assumes that
traders’ values for the exchanged good are determined by
fundamental (common) shocks. At the same time, design innovation in
contemporaneous markets seems to exploit demand interdependence among
agents with similar tastes or common information sharing (e.g., Facebook
ads, the practice of customer targeting). This paper demonstrates that
with heterogeneous interdependence among agents’ values or noise
in signals about values, opportunities to innovate in smaller or less
connected (in the network-theoretic sense) markets may dominate those in
larger or better connected markets