A search model of centralized and decentralized trade

Jianjun Miao

Review of Economic Dynamics, 2006, vol. 9, issue 1, 68-92

Abstract: This paper presents a search model of centralized and decentralized trade. In a centralized market, trades are intermediated by market makers at publicly posted bid-ask prices. In a decentralized market, traders search counterparties. Prices are negotiated and transactions are conducted in private meetings among traders. Traders can choose which market to enter. The determinant of bid-ask spreads and liquidity is analyzed. The welfare consequence of the market fragmentation is also analyzed. It is shown that compared to the competitive market-making, monopolistic market-making may improve social welfare. (Copyright: Elsevier)

Keywords: Search; Matching and bargaining; Bid.ask spread; Liquidity; Welfare; Walrasian equilibrium (search for similar items in EconPapers)
JEL-codes: D4 D83 G12 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Related works:
Working Paper: A Search Model of Centralzied and Decentralized Trade (2005)
Working Paper: A search model of centralized and decentralized trade (2005)
Working Paper: A Search Model of Centralized and Decentralized Trade (2004)
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DOI: 10.1016/j.red.2005.10.003

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