Welfare Consequences of Information Aggregation and Optimal Market Size
研究交易者同时面临禀赋风险和信息不对称时，信息加总如何影响福利，发现最优市场规模需平衡风险分担与信息加总，无限多交易者的市场未必最优。
We analyze the welfare implications of information aggregation in a trading model where traders have both idiosyncratic endowment risk and asymmetric information about security payoffs. The optimal market size balances two forces: (i) the risk-sharing role of markets, which creates a positive externality amongst traders, against (ii) the information-aggregation role of prices, which leads to prices that are more correlated with security payoffs, thereby undermining the hedging function of markets. Our analysis indicates that a market with infinitely many traders may not be the right welfare benchmark in the presence of risk aversion and information aggregation.