Hiding Behind the Veil: Pre-Trade Transparency, Informed Traders and Market Quality

Kotha, Kiran Kumar; Yadav, Pradeep K.; Thirumalai, Ramabhadran S.

doi:10.2139/ssrn.1342320

Cited by 1 publication

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“…All in all, we observe this interesting effect: albeit intentional or not, hiding one’s own position and at the same time gathering information from others makes the agents well-informed and brings them into a strong position with respect to trading issues. This is also a well-known standard strategy in market business [ 23 ] and naturally emerged in the reputation game simulation.…”

Section: Resultsmentioning

confidence: 99%

Information and Agreement in the Reputation Game Simulation

Kainz

Bœhm

Utz

et al. 2022

Entropy

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Modern communication habits are largely shaped by the extensive use of social media and other online communication platforms. The enormous amount of available data and speed with which new information arises, however, often suffices to cause misunderstandings, false conclusions, or otherwise disturbed opinion formation processes. To investigate some of these effects we use an agent-based model on gossip and reputation dynamics with 50 agents, including Bayesian knowledge updates under bounded rationality and up to the second-order theory of mind effects. Thereby, we observe the occurrence of reputation boosts from fake images, as well as the advantage of hiding one’s opinion in order to become a strong information trader. In addition, the simulations show fundamentally different mechanisms for reaching high agreement with others and becoming well-informed. Additionally, we investigate the robustness of our results with respect to different knowledge-update mechanisms and argue why it makes sense to especially emphasize the margins of distribution when judging a bounded quantity such as honesty in a reputation game simulation.

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Section: Resultsmentioning

confidence: 99%