Decentralized trading with private information

Mikhail Golosov, Guido Lorenzoni, Aleh Tsyvinski

Research output: Contribution to journalArticlepeer-review

33 Scopus citations


The paper studies how asset prices are determined in a decentralized market with asymmetric information about asset values. We consider an economy in which a large number of agents trade two assets in bilateral meetings. A fraction of the agents has private information about the asset values. We show that, over time, uninformed agents can elicit information from their trading partners by making small offers. This form of experimentation allows the uninformed agents to acquire information as long as there are potential gains from trade in the economy. As a consequence, the economy converges to a Pareto efficient allocation.

Original languageEnglish (US)
Pages (from-to)1055-1091
Number of pages37
Issue number3
StatePublished - May 2014

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • Bilateral trading
  • Information revelation
  • Over-the-counter markets


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