Models of Market Organization with Imperfect Information: A Survey

This paper surveys recent theoretical work characterizing markets whose participants act on the basis of sketchy and incomplete information. Its focus is market equilibrium. Models of what is usually called disequilibrium behavior do not make sense and cannot serve as reliable guides to further theorizing or to policy unless they are consistent and coherent. No single equilibrium concept is valid for all situations. The different models analyzed have a variety of different equilibria; some are characterized by a single price, some by a distribution of prices. An attempt is made to identify the features responsible for the different equilibria.