A search model of centralized and decentralized trade

This paper presents a search model of centralized and decentralized trade. In a centralized market, trades are intermediated by market makers at publicly posted bid-ask prices. In a decentralized market, traders search counterparties. Prices are negotiated and transactions are conducted in private meetings among traders. Traders can choose which market to enter. The determinant of bid-ask spreads and liquidity is analyzed. The welfare consequence of the market fragmentation is also analyzed. It is shown that compared to the competitive market-making, monopolistic market-making may improve social welfare. (Copyright: Elsevier)

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Year of publication:	2006
Authors:	Miao, Jianjun
Published in:	Review of Economic Dynamics. - Society for Economic Dynamics - SED. - Vol. 9.2006, 1, p. 68-92
Publisher:	Society for Economic Dynamics - SED
Subject:	Search \| Matching and bargaining \| Bid.ask spread \| Liquidity \| Welfare \| Walrasian equilibrium

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Extent:	application/pdf
Type of publication:	Article
Notes:	Published
Other identifiers:	10.1016/j.red.2005.10.003 [DOI]
Classification:	D4 - Market Structure and Pricing ; D83 - Search, Learning, Information and Knowledge ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005069653