A theory of an intermediary with nonexclusive contracting
AbstractThis paper addresses large markets where agents cannot commit to sign exclusive contracts may induce agents to promise the same asset to multiple counterparties and subsequently default. Is how that in such markets an intermediary can increase welfare by simply setting limits on the number of contracts that agents can report to it voluntarily. In some cases, these limits must be nonbinding in equilibrium, and reported trades must not be made public. The theory shows why an exchange may be valuable even when markets are liquid. It also suggests why in some cases a regulator should not reveal information it collects from banks. ; Superseded by Working Paper 10-28
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Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 05-12.
Date of creation: 2005
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-07-11 (All new papers)
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