caa a22 4500 397544669 CHVBK 20180308164736.0 cr unu---uuuuu 161202e199601 xx s 000 0 eng 10.2307/2298114 doi (NATIONALLICENCE)oxford-10.2307/2298114 Shin Hyun Song University of Southampton Comparing the Robustness of Trading Systems to Higher-Order Uncertainty [Elektronische Daten] [Hyun Song Shin] This paper compares the performance of a decentralized market with that of a dealership market when traders have differential information. Trade occurs as a result of equilibrium actions in a Bayesian game, where uncertainty is captured by a finite state space and information is represented by partitions on this space. In the benchmark case of trade with common knowledge of endowments, the two mechanisms deliver virtually identical outcomes. However, with differential information, the dealership market has strictly higher trading volume, and yields an efficient post-trade allocation in most states. In contrast, the decentralized market suffers from suboptimal trading volume. The reason for this poor performance is the vulnerability of the decentralized market to higher-order uncertainty concerning the fundamentals of the market. Traders may know that mutually beneficial trade is feasible, and perhaps know that they know, and yet a failure of common knowledge that this is so precludes efficient trade. The dealership market is robust to this type of uncertainty. © 1996 The Review of Economic Studies Limited The Review of Economic Studies Wiley-Blackwell 63/1(1996-01), 39-59 0034-6527 63:1<39 1996 63 restud https://doi.org/10.2307/2298114 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.2307/2298114 text/html Onlinezugriff via DOI NATIONALLICENCE 100 1- Shin Hyun Song University of Southampton NATIONALLICENCE 773 0- The Review of Economic Studies Wiley-Blackwell 63/1(1996-01), 39-59 0034-6527 63:1<39 1996 63 restud Metadata rights reserved CC BY-NC-4.0 http://creativecommons.org/licenses/by-nc/4.0 nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-oxford