Market selection in large economies: a matter of luck

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Massari, Filippo (2019) Market selection in large economies: a matter of luck. Theoretical Economics, 14. 437–473. ISSN 1933-6837

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Abstract

In a general equilibrium model with a continuum of traders and bounded aggregate endowment, I investigate the Market Selection Hypothesis that markets favor traders with accurate beliefs. Contrary to known results for economies with (only) finitely many traders, I find that risk attitudes affect traders' survival and that markets can favor 'lucky' traders with incorrect beliefs over 'skilled' traders with accurate beliefs. My model allows for a clear distinction between luck and skills and it shows that market selection forces induce efficient prices even when accurate traders do not survive in the long run.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > School of Economics
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Behavioural Economics Faculty of Social Sciences > Research Groups > Economic Theory
Related URLs:	https://econtheory.org/ojs/index.php/te/...
Depositing User:	LivePure Connector
Date Deposited:	16 Jul 2020 23:47
Last Modified:	22 Oct 2022 06:30
URI:	https://ueaeprints.uea.ac.uk/id/eprint/76153
DOI:	10.3982/TE2456

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