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Meeting Technologies in Decentralized Asset Markets

Author

Listed:
  • Robert Shimer

    (University of Chicago)

  • Gregor Jarosch

    (Stanford University)

  • Maryam Farboodi

    (Princeton University)

Abstract

We study decentralized trading networks where agents differ in both their time-varying taste for an asset and the constant frequency at which they meet others. We show that fast agents can endogenously arise as intermediators whose net valuation of an asset gets moderated through their exposure to others. We show that allocating meetings in an ex-ante asymmetric fashion across agents generates higher welfare then a homogeneous distribution of meeting frequencies, only if some agents intermediate. We also characterize properties of the market equilibrium in which ex-ante identical agents choose their meeting rates, and compare the allocation with the planner allocation.

Suggested Citation

  • Robert Shimer & Gregor Jarosch & Maryam Farboodi, 2016. "Meeting Technologies in Decentralized Asset Markets," 2016 Meeting Papers 844, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:844
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    References listed on IDEAS

    as
    1. Lester, Benjamin & Weill, Pierre-Olivier & Hugonnier, Julien, 2022. "Heterogeneity in decentralized asset markets," Theoretical Economics, Econometric Society, vol. 17(3), July.
    2. Darrell Duffie, 2012. "Over-The-Counter Markets," Introductory Chapters, in: Dark Markets: Asset Pricing and Information Transmission in Over-the-Counter Markets, Princeton University Press.
    3. Ricardo Lagos & Guillaume Rocheteau, 2009. "Liquidity in Asset Markets With Search Frictions," Econometrica, Econometric Society, vol. 77(2), pages 403-426, March.
    4. Songzi Du & Haoxiang Zhu, 2014. "Welfare and Optimal Trading Frequency in Dynamic Double Auctions," NBER Working Papers 20588, National Bureau of Economic Research, Inc.
    5. Vayanos, Dimitri & Wang, Tan, 2007. "Search and endogenous concentration of liquidity in asset markets," Journal of Economic Theory, Elsevier, vol. 136(1), pages 66-104, September.
    6. Shimer Robert & Smith Lones, 2001. "Matching, Search, and Heterogeneity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-18, April.
    7. Shengxing Zhang & Briana Chang, 2015. "Endogenous Market-making and Formation of Trading Links," 2015 Meeting Papers 1227, Society for Economic Dynamics.
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    Citations

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    Cited by:

    1. Artem Neklyudov, 2019. "Bid-Ask Spreads and the Over-the-Counter Interdealer Markets: Core and Peripheral Dealers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 57-84, July.
    2. Maryam Farboodi & Gregor Jarosch & Guido Menzio, 2016. "Intermediation as Rent Extraction," PIER Working Paper Archive 16-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Dec 2016.
    3. Semih Üslü, 2019. "Pricing and Liquidity in Decentralized Asset Markets," Econometrica, Econometric Society, vol. 87(6), pages 2079-2140, November.

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