Centralized vs Decentralized Markets: The Role of Connectivity

Rohit Rahi, Burcu Kapar, Giulia Iori, Eva Camacho, Simone Alfarano and Albert Banal-Estañol

No 1420, Working Papers from Barcelona School of Economics

Abstract: We consider a setting in which privately informed agents are located in a network and trade a risky asset with other agents with whom they are directly connected. We compare the performance, both theoretically and experimentally, of a complete network (centralized market) to incomplete networks with differing levels of connectivity (decentralized markets). We show that decentralized markets can deliver higher informational efficiency, with prices closer to fundamentals, as well as higher welfare for mean-variance investors.

Keywords: networks; heuristic learning; informational efficiency; experimental asset markets (search for similar items in EconPapers)
JEL-codes: C92 D82 G14 (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-exp, nep-fdg and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://bw.bse.eu/wp-content/uploads/2024/01/1420-file.pdf (application/pdf)

Related works:
Working Paper: Centralized vs decentralized markets: The role of connectivity (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1420

Access Statistics for this paper

More papers in Working Papers from Barcelona School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Bruno Guallar ().