Cournot Competition, Financial Option markets and Efficiency

Bert Willems

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: Allaz and Vila (1993) show that the existence of futures markets increases the efficiency of markets in a Cournot setting. This paper looks at the efficiency effect of financial options in a similar framework. It shows that also the existence of financial options makes markets more efficient; though to a smaller extent than futures. This is particularly relevant for markets with market power and costly storage, like the electricity market.

Date: 2004-03
New Economics Papers: this item is included in nep-com, nep-fmk and nep-mic
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0414

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