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Endogenous bourse structures

Author

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  • Faias, Marta
  • Luque, Jaime

Abstract

We propose a novel approach to the market microstructure theory, where a bourse is a club that facilitates asset trading among its members. Under the new perspective of club theory, we provide an equilibrium setting where traders must belong to at least one bourse to trade assets. For this bourse economy, we show that equilibrium exists generically, and give positive predictions regarding the formation of a large unique bourse, and/or a bourse with complete markets. We also give examples that illustrate how traders’ attributes and bourse formation costs explain bourse size and composition, market incompleteness, and multiple memberships.

Suggested Citation

  • Faias, Marta & Luque, Jaime, 2012. "Endogenous bourse structures," UC3M Working papers. Economics we1106, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we1106
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    File URL: https://e-archivo.uc3m.es/bitstream/handle/10016/10601/we1106.pdf?sequence=5
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    References listed on IDEAS

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    1. Mas-Colell, Andreu & Nachbar, John H., 1991. "On the finiteness of the number of critical equilibria, with an application to random selections," Journal of Mathematical Economics, Elsevier, vol. 20(4), pages 397-409.
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    Cited by:

    1. Boncinelli, Leonardo & Pin, Paolo, 2014. "Efficiency and Stability in a Process of Teams Formation," MPRA Paper 56356, University Library of Munich, Germany.

    More about this item

    Keywords

    Bourse structures;

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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