A Search Model of Centralzied and Decentralized Trade
Abstract
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)(This abstract was borrowed from another version of this item.)
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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-144.Length: 35 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:bos:iedwpr:dp-144
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Related research
Keywords: searching; matching and bargaining; bid-ask spread; liquidity; welfare; Walrasian equilibrium;Other versions of this item:
- Jianjun Miao, 2006. "A search model of centralized and decentralized trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 68-92, January.
- Jianjun Miao, 2004. "A Search Model of Centralized and Decentralized Trade," Microeconomics 0410003, EconWPA.
- Junjian Miao, . "A search model of centralized and decentralized trade," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-012, Boston University - Department of Economics, revised Oct 2005.
- D4 - Microeconomics - - Market Structure and Pricing
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-06 (All new papers)
- NEP-DGE-2006-05-06 (Dynamic General Equilibrium)
- NEP-FMK-2006-05-06 (Financial Markets)
- NEP-INT-2006-05-06 (International Trade)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Ricardo Lagos & Guillaume Rocheteau, 2008.
"Liquidity in asset markets with search frictions,"
Staff Report
408, Federal Reserve Bank of Minneapolis.
- Ricardo Lagos & Guillaume Rocheteau, 2009. "Liquidity in Asset Markets With Search Frictions," Econometrica, Econometric Society, vol. 77(2), pages 403-426, 03.
- Ricardo Lagos & Guillaume Rocheteau, 2007. "Liquidity in asset markets with search frictions," Working Paper 0706, Federal Reserve Bank of Cleveland.
- Guillaume Rocheteau & Ricardo Lagos, 2008. "Liquidity in asset markets with search frictions," Working Paper 0804, Federal Reserve Bank of Cleveland.
- Ricardo Lagos & Guillaume Rocheteau, 2006.
"Search in asset markets,"
Working Paper
0607, Federal Reserve Bank of Cleveland.
- Ricardo Lagos & Guillaume Rocheteau, 2006. "Search in Asset Markets," 2006 Meeting Papers 869, Society for Economic Dynamics.
- Ricardo Lagos & Guillaume Rocheteau, 2006. "Search in asset markets," Staff Report 375, Federal Reserve Bank of Minneapolis.
- Gara Afonso & Ricardo Lagos, 2012.
"Trade dynamics in the market for federal funds,"
Staff Reports
549, Federal Reserve Bank of New York.
- Ricardo Lagos & Gara Afonso, 2010. "Trade Dynamics in the Market for Federal Funds," 2010 Meeting Papers 424, Society for Economic Dynamics.
- Ricardo Lagos & Gara Afonson, 2011. "Trade Dynamics in the Market for Federal Funds," 2011 Meeting Papers 314, Society for Economic Dynamics.
- Guillaume Rocheteau & Pierre-Olivier Weill, 2011.
"Liquidity in frictional asset markets,"
Working Paper
1105, Federal Reserve Bank of Cleveland.
- Guillaume Rocheteau & Pierre‐Olivier Weill, 2011. "Liquidity in Frictional Asset Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 261-282, October.
- Makoto Watanabe, 2012. "Middlemen: A Directed Search Equilibrium Approach," Tinbergen Institute Discussion Papers 12-138/V, Tinbergen Institute.
- Yuet-Yee Wong & Randall Wright, 2011. "Buyers, sellers and middlemen: variations in search theory," Working Papers 691, Federal Reserve Bank of Minneapolis.
- José Ramón Martínez-Resano, 2005. "Size and heterogeneity matter. A microstructure-based analysis of regulation of secondary markets for governments bonds," Banco de España Occasional Papers 0501, Banco de España.
- Hajime Tomura, 2012. "On the Existence and Fragility of Repo Markets," Working Papers 12-17, Bank of Canada.
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