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A Search Model of Centralized and Decentralized Trade

Author

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  • Jianjun Miao

    (Department of Economics, Boston University)

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.

Suggested Citation

  • Jianjun Miao, 2004. "A Search Model of Centralized and Decentralized Trade," Microeconomics 0410003, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpmi:0410003
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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