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Eliciting Traders’ Knowledge in “Frictionless” Asset Market

Staff Report 144 | Published August 1, 1991

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Author

Edward J. Green Senior Policy Advisor, Federal Reserve Bank of Chicago

Eliciting Traders’ Knowledge in “Frictionless” Asset Market

Abstract

Intuitively, a patient trader should be able to make his trading partners compete to reveal whatever information is relevant to their transactions with him. This possibility is examined in the context of a model resembling that of Gale (1986). The main result is that, under assumptions having to do with asset structure and spanning, incentive-compatible elicitation of trading partners’ knowledge is feasible.