Monopolistic security design in finance economies
AbstractThe purpose of this paper is to analyze endogenous asset innovation by an entrepreneurial exchange owner in a general equilibrium model of incomplete security markets with financial transaction fees. A monopolistic market maker has the technology to introduce a new option into the economy and charge investors proportional transaction fees if they trade on the exchange. The market maker's objective is to choose the security and transaction fee that maximize revenues when opening the exchange. A computational analysis of this problem is necessary since there are no interesting models with closed-form solutions. We compute the price and welfare effects of the option introduction.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 18 (2001)
Issue (Month): 1 ()
Note: Received: March 14, 2000; revised version: December 12, 2000
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- Karl Schmedders, 2000. "Monopolistic Security Design in Finance Economies," Discussion Papers 1288, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Karl Schmedders, 2000. "Monopolistic Security Design In Finance Economies," Computing in Economics and Finance 2000 129, Society for Computational Economics.
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Detemple, Jerome & Jorion, Philippe, 1990. "Option listing and stock returns : An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 14(4), pages 781-801, October.
- Detemple, Jerome B & Selden, Larry, 1991. "A General Equilibrium Analysis of Option and Stock Market Interactions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(2), pages 279-303, May.
- Kenneth L. Judd & Sy-Ming Guu, 2001.
"Asymptotic Methods for Asset Market Equilibrium Analysis,"
NBER Working Papers
8135, National Bureau of Economic Research, Inc.
- Sy-Ming Guu & Kenneth L. Judd, 2001. "Asymptotic methods for asset market equilibrium analysis," Economic Theory, Springer, vol. 18(1), pages 127-157.
- Chiaki Hara, 2010. "Pareto Improvement and Agenda Control of Sequential Financial Innovations," KIER Working Papers 748, Kyoto University, Institute of Economic Research.
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