Ricardo Serrano-Padial Research Papers

Abstract: This paper studies information aggregation in common value double auctions with a continuum of traders. The population includes both sophisticated and naive traders. Existence and uniqueness of monotone equilibrium prices is shown under mild conditions on the distribution of naive bids. The set of possible asset values exhibits two distinct regions: a region where prices equal values, and a mispricing region featuring a local favorite-longshot bias. If the proportion of naive traders falls below a (strictly positive) lower bound, prices are always correct. In contrast, when the presence of naive traders is above some upper bound there is mispricing almost everywhere. This indicates that the efficient markets hypothesis can hold when there exist non-negligible levels of noise trade, although even a moderate presence of boundedly rational traders can lead to severe mispricing. It is shown through an example that, when there is uncertainty about the fraction of naive traders, the same qualitative results hold in expectation. An empirical method to identify the mispricing region is suggested.

Abstract: This paper investigates the existence of bargaining mechanisms that induce trade with positive probability when agents are risk neutral, which constitutes a polar case not covered by existing no trade results. It is shown that a quasi no-trade theorem holds in the bilateral case: if the distributions of traders' private signals are continuous, no equilibrium with positive probability of trade exists in any trade environment with pure common values. With discrete distributions trade only occurs when the seller and the buyer receive their lowest and highest signals, respectively. A counterexample in which trade happens with probability one is provided to show that the result fails to hold when there are more than two traders. A property of multilateral mechanisms eliciting trade is that buyers' payments cannot equal expected conditional values almost everywhere. This implies that trade is incompatible with perfect information revelation in common value environments.

Abstract: Despite predictions of complete free riding in one shot public good games, repeated interaction allows for any level of public provision, so long as it is feasible and Pareto superior to no provision at all. I investigate the long run effects of weakening the information players have about each others' preferences. I find that when agents are patient enough any provision level can be attained in the long run.