Strategic Fragmented Markets

Ana Babus and Cecilia Parlatore

No 28729, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the determinants of asset market fragmentation in a model with strategic investors that disagree about the value of an asset. Investors' choices determine the market structure. Fragmented markets are supported in equilibrium when disagreement between investors is low. In this case, investors take the same side of the market and are willing to trade in smaller markets with a higher price impact to face less competition when trading against a dealer. The maximum degree of market fragmentation increases as investors' priors are more correlated. Dealers can benefit from fragmentation, but investors are always better off in centralized markets.

JEL-codes: D43 D47 G12 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-gth and nep-mst
Note: AP
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published as Ana Babus & Cecilia Parlatore, 2021. "Strategic fragmented markets," Journal of Financial Economics, .

Downloads: (external link)
http://www.nber.org/papers/w28729.pdf (application/pdf)

Related works:
Journal Article: Strategic fragmented markets (2022)
Working Paper: Strategic Fragmented Markets (2016)
Working Paper: Strategic Fragmented Markets (2016)
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:nbr:nberwo:28729

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28729

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().