Does ambiguity a↵ect the e ciency of information aggregation in dynamic markets? To the present day there is a sparse and fragmented literature pointing towards an answer. This Thesis studies dynamic markets under ambiguity and examines under what conditions information gets aggregated. Three particular perspectives are investigated: i) Does information gets aggregated when traders are myopic and ambiguity averse? In the first Chapter it is proved that information gets aggregated only when a "separable under ambiguity" security is traded. In case the security is not "separable under ambiguity", then there exist markets in which information does not get aggregated. The class of "separable under ambiguity" securities is proved to be non trivial. Finally, it is proved that even if the security is not "separable under ambiguity", traders will reach an agreement about the price of the security. ii) Does information gets aggregated when traders are strategic and ambiguity averse? By defining appropriately an equilibrium concept for infinite horizon games of incomplete information in a setting with ambiguity, it is proved that in a market with a "separable under ambiguity" security information gets aggregated in every equilibrium in pure strategies. The second chapter concludes by proving that when the security is not "separable under ambiguity", then there exists an equilibrium in which information does not get aggregated. iii) Are the previous theoretical predictions met in real life? In the third chapter a laboratory experiment is included. The experimental design follows the theoretical models of the first two chapters. The results of the experiment provide significant evidence in favor of the results of the first two chapters. v

The ability of markets to aggregate information through prices is examined in a dynamic environment with unawareness. We find that if all traders are able to minimally update their awareness when they observe a price that is counterfactual to their private information, they will eventually reach an agreement, thus generalising the result of Geanakoplos and Polemarchakis [1982]. Moreover, if the traded security is separable, then agreement is on the correct price and there is information aggregation, thus generalizing the result of Ostrovsky [2012] for non-strategic traders. We find that a trader increases her awareness if and only if she is able to become aware of something that other traders are already aware of and, under a mild condition, never becomes aware of anything more. In other words, agreement is more the result of understanding each other, rather than being unboundedly sophisticated.

AbstractThe ability of markets to aggregate information through prices is examined in a dynamic environment with unawareness. We find that if all traders are able to minimally update their awareness when they observe a price that is counterfactual to their private information, they will eventually reach an agreement, thus generalising the result of Geanakoplos and Polemarchakis (1982). Moreover, if the traded security is separable, then agreement is on the correct price and there is information aggregation, thus generalizing the result of Ostrovsky (2012) for non-strategic traders. We find that a trader increases her awareness if and only if she is able to become aware of something that other traders are already aware of and, under a mild condition, never becomes aware of anything more. In other words, agreement is more the result of understanding each other, rather than being unboundedly sophisticated.