[rtpg]

>2. The only reason that Jill has a speed advantage over Jack is because she has paid for it! She has paid to co-locate her server at the exchange, and she has paid to use high-speed connections between exchanges. Are we going to declare that paying for a competitive advantage is suddenly immoral?

If we want an efficient market,we need perfect information. Information asymmetry creates inefficient markets.

The moral argument behind free markets is that it leads to "efficient" outcomes. If people are going to do bullshit like this, there's no reason _not_ to set regulations to stop this.

[throwaway283719]

If you want a reasonably efficient market, you need some participants to have close to perfect information.

There is no market anywhere in the world that is 100% efficient, because the costs of getting to efficiency are prohibitively high. It's like trying to reach the speed of light - you can expend more and more effort getting closer and closer, but you can never actually reach it.

I'm not saying that what we have now is perfect, but it's a damn sight better than what we used to have.

[asgard1024]

> If you want a reasonably efficient market, you need some participants to have close to perfect information.

Is this proven somewhere or you just assume the optimal strategy for markets is continuous?

I mean, it's not clear that the optimal strategy for "slightly imperfect markets" is at all close to the optimal strategy for markets with perfect information. And I actually doubt it can be proven, in the general case.

[ska]

Not only is it not clear, intuition from other areas of optimization would suggest it's unlikely to be true.

I've asked a couple of economists about this, but didn't get a satisfying answer. To be fair, it wasn't their area at all - and I may just have misunderstood what they were saying.

[tjgq]

I'm curious: can you name an optimization problem you would get that intuition from?

[asgard1024]

I am not a game theorist, but take Centipede game for instance. If you know the exact number of rounds in advance, the optimal strategy is markedly different than if you don't know it. And I think there are many weird behaviors like that in iterated games, where optimal solution for infinite time horizon is not the same (or doesn't even exist) as the limit of optimal solutions for finite horizons approaching infinity.

[josephlord]

> If you want a reasonably efficient market, you need some participants to have close to perfect information.

I don't think this follows at all. It isn't clear that if the assumptions are almost true the outcome reasonably close to that if the assumptions were true.

Even if it does hold true remember that economists view monopolies as perfectly efficient solutions but that in that scenario it is efficient because the monopoly captures all the available value not the consumers. I also believe that the maths behind the efficient market hypothesis break down if its assumptions don't hold.