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(De)centralizing Trade

Author

Listed:
  • Christian Opp

    (University of Pennsylvania)

  • Vincent Glode

    (Wharton School)

Abstract

We propose a parsimonious model to evaluate the relative merits of centralized and decentralized trade when agents are asymmetrically informed about the value of an asset. In a centralized market, the seller posts one price and buyers simultaneously decide whether to pay this price for the asset. In a decentralized market, the seller sequentially contacts buyers and quotes them potentially different prices. We compare the social efficiency of trade in these two types of market when traders’ information sets are independent of the market structure as well as when the acquisition of information by traders is endogenous.

Suggested Citation

  • Christian Opp & Vincent Glode, 2016. "(De)centralizing Trade," 2016 Meeting Papers 1591, Society for Economic Dynamics.
    • Handle: RePEc:red:sed016:1591
    as

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    References listed on IDEAS

    as
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    7. Darrell Duffie & Haoxiang Zhu, 2011. "Does a Central Clearing Counterparty Reduce Counterparty Risk?," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 1(1), pages 74-95.
    8. S. Viswanathan & James J. D. Wang, 2004. "Inter-Dealer Trading in Financial Markets," The Journal of Business, University of Chicago Press, vol. 77(4), pages 987-1040, October.
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