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Instability of Centralized Markets

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  • Ahmad Peivandi
  • Rakesh V. Vohra

Abstract

Centralized markets reduce search for buyers and sellers. Their “thickness” increases the chance of order execution at nearly competitive prices. In spite of the incentives to consolidate, some markets, securities markets and on‐line advertising being the most notable, are fragmented into multiple trading venues. We argue that fragmentation is an inevitable feature of any centralized market except in special circumstances.

Suggested Citation

  • Ahmad Peivandi & Rakesh V. Vohra, 2021. "Instability of Centralized Markets," Econometrica, Econometric Society, vol. 89(1), pages 163-179, January.
    • Handle: RePEc:wly:emetrp:v:89:y:2021:i:1:p:163-179
    DOI: 10.3982/ECTA15579
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    References listed on IDEAS

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    2. Solimine, Philip & Isaac, R. Mark, 2023. "Reputation and market structure in experimental platforms," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 528-559.

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