Cournot Competition, Financial Option markets and Efficiency
AbstractAllaz and Vila (1993) show that the existence of futures markets increases the efficiency of markets in a Cournot setting. This paper looks at the efficiency effect of financial options in a similar framework. It shows that also the existence of financial options makes markets more efficient; though to a smaller extent than futures. This is particularly relevant for markets with market power and costly storage, like the electricity market.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0414.
Date of creation: Mar 2004
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-12 (All new papers)
- NEP-COM-2008-04-12 (Industrial Competition)
- NEP-FMK-2008-04-12 (Financial Markets)
- NEP-MIC-2008-04-12 (Microeconomics)
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