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Trading Uncertainty and Market Form

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  • Ionnides, Yannis M

Abstract

This paper examines purely random multilateral matching among a large number of informationally isolated individuals who desire to trade. The structure of links among traders is characterized by means of random graphs, defined by a parameter that is chosen by prospective traders. Trading groups of all sizes (including pairs as a special case) result, but the size distribution may contain a mass point at infinity. That is, within a certain subset of the entire economy, trading uncertainty is entirely eliminated. The equilibrium price distribution consists of a mass point and of a mixture of densities. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Ionnides, Yannis M, 1990. "Trading Uncertainty and Market Form," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 619-638, August.
    • Handle: RePEc:ier:iecrev:v:31:y:1990:i:3:p:619-38
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    Cited by:

    1. Adriaan R. Soetevent, 2006. "Empirics of the Identification of Social Interactions; An Evaluation of the Approaches and Their Results," Journal of Economic Surveys, Wiley Blackwell, vol. 20(2), pages 193-228, April.
    2. Hans Haller, 2015. "Network Vulnerability: A Designer-Disruptor Game," Working Papers e07-50, Virginia Polytechnic Institute and State University, Department of Economics.
    3. Yannis M. Ioannides, 2005. "Random Graphs and Social Networks: An Economics Perspective," Discussion Papers Series, Department of Economics, Tufts University 0518, Department of Economics, Tufts University.
    4. Steven N. Durlauf & Ananth Seshadri, 2003. "Is assortative matching efficient?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 475-493, March.
    5. Antonio Cabrales & Antoni Calvó-Armengol & Yves Zenou, 2009. "Social Interactions and Spillovers: Incentives,Segregation and Topology," Working Papers 2009-06, FEDEA.
    6. Edward L. Glaeser & Jose Scheinkman, 2000. "Non-Market Interactions," NBER Working Papers 8053, National Bureau of Economic Research, Inc.
    7. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    8. Quah, Danny T, 1997. "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs," Journal of Economic Growth, Springer, vol. 2(1), pages 27-59, March.
    9. Cowan, Robin & Jonard, Nicolas, 2004. "Network structure and the diffusion of knowledge," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1557-1575, June.
    10. Nicolaas J. Vriend, 1996. "A model of market-making," Economics Working Papers 184, Department of Economics and Business, Universitat Pompeu Fabra.
    11. Aliprantis, C.D. & Camera, G. & Puzzello, D., 2007. "A random matching theory," Games and Economic Behavior, Elsevier, vol. 59(1), pages 1-16, April.
    12. Franck Galtier & François Bousquet & Martine Antona & Pierre Bommel, 2012. "Markets as communication systems," Journal of Evolutionary Economics, Springer, vol. 22(1), pages 161-201, January.
    13. Rama Cont & Jean-Philippe Bouchaud, 1997. "Herd behavior and aggregate fluctuations in financial markets," Science & Finance (CFM) working paper archive 500028, Science & Finance, Capital Fund Management.
    14. Brock, W.A. & Durlauf, S.N., 1995. "Discrete Choice with Social Interactions I: Theory," Working papers 9521, Wisconsin Madison - Social Systems.
    15. Howitt, Peter & Clower, Robert, 2000. "The emergence of economic organization," Journal of Economic Behavior & Organization, Elsevier, vol. 41(1), pages 55-84, January.
    16. Alessio D'Ignazio & Emanuele Giovannetti, 2006. "From Exogenous To Endogenous Economic Networks: Internet Applications," Journal of Economic Surveys, Wiley Blackwell, vol. 20(5), pages 757-796, December.
    17. Alan Kirman, 2002. "Reflections on interaction and markets," Quantitative Finance, Taylor & Francis Journals, vol. 2(5), pages 322-326.
    18. Cabrales, Antonio & Calvó-Armengol, Antoni & Zenou, Yves, 2007. "Effort and synergies in network formation," UC3M Working papers. Economics we072515, Universidad Carlos III de Madrid. Departamento de Economía.
    19. Danny Quah, 1997. "Empirics for Growth and Distribution," CEP Discussion Papers dp0324, Centre for Economic Performance, LSE.
    20. Rama CONT & Jean-Philippe BOUCHAUD, 1997. "Herd behavior and aggregate fluctuations in financial markets," Finance 9712008, University Library of Munich, Germany, revised 06 Jan 1998.
    21. Rama Cont & Jean-Philippe Bouchaud, 1997. "Herd behavior and aggregate fluctuations in financial markets," Papers cond-mat/9712318, arXiv.org, revised Jan 1998.
    22. Brock,W.A. & Durlauf,S.N., 2005. "Social interactions and macroeconomics," Working papers 5, Wisconsin Madison - Social Systems.
    23. D'Ignazio, A. & Giovannetti, E., 2004. "From Exogenous to Endogenous Networks: Internet Applications," Cambridge Working Papers in Economics 0445, Faculty of Economics, University of Cambridge.

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