Centralized vs decentralized markets: The role of connectivity

Simone Alfarano, Albert Banal-Estañol (), Eva Camacho, Giulia Iori, Burcu Kapar and Rohit Rahi
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Albert Banal-Estañol: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3419756

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

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-ifn and nep-net
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Working Paper: Centralized vs Decentralized Markets: The Role of Connectivity (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1877

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