Exchange Design and Welfare

Marzena Rostek and Ji Hee Yoon
Additional contact information
Marzena Rostek: University of Wisconsin-Madison
Ji Hee Yoon: University of Wisconsin - Madison

No 374, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: This paper introduces a model of decentralized markets in which a trader’s demand for each asset is contingent on the price of that asset alone rather than on the price of all assets he trades in other exchanges. Derivatives are generally nonredundant. We characterize the scope for introducing nonredundant derivatives that do and no not replicate the payoffs of the existing assets. With suitable security design, markets with uncontingent demand schedules give rise to weakly larger welfare than markets with contingent schedules, given the set of traders and underlying assets. Introduction of too many derivatives may lower welfare.

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2018/paper_374.pdf (application/pdf)

Related works:
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:red:sed018:374

Access Statistics for this paper

More papers in 2018 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().