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CANCELLED | Ulric B. and Evelyn L. Bray Social Sciences Seminar

Wednesday, May 29, 2019
4:00pm to 5:00pm
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Baxter B125
This seminar has been cancelled.
Erik Eyster, Alec P. Alexander Chair of Economics and Professor of Economics, Department of Economics, UC Santa Barbara,

Title: Non-Common Priors, Private Information, and Trade

Abstract: Models of non-common priors—in which agents "agree to disagree"—have been used to explain the large volume of trade in financial markets, which is widely seen as inconsistent with traditional common-priors models. While non-common-priors models can elegantly explain such volume, we show that they make several counter-intuitive predictions about the role of information in trading environments. For instance, such models predict that private information often impedes trade in the same way as it does in common-priors models, and that market participants will not typically trade in the direction of their private information. We argue that failures to account for others' information—a notion we call "disagreement neglect"—may better explain these trading pattern. Written with Tristan Gagnon-Bartsch and Matthew Rabin (Harvard).

For more information, please contact Mary Martin by phone at 626-395-4571 or by email at mmartin@caltech.edu.