A search model of centralized and decentralized trade

Jianjun Miao

No WP2005-012, Boston University - Department of Economics - Macroeconomics Working Papers Series from Boston University - Department of Economics

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 determinants of bid–ask spreads and liquidity are 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. ? 2005 Elsevier Inc. All rights reserved.

Keywords: Search; Matching and bargaining; Bid–ask spread; Liquidity; Welfare; Walrasian equilibriummarkets (search for similar items in EconPapers)
JEL-codes: D4 D83 G12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2005-10
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Review of Economic Dynamics

Downloads: (external link)
http://people.bu.edu/miaoj/intermedRED.pdf Revised version, 2005 (application/pdf)

Related works:
Journal Article: A search model of centralized and decentralized trade (2006)
Working Paper: A Search Model of Centralzied and Decentralized Trade (2005)
Working Paper: A Search Model of Centralized and Decentralized Trade (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bos:macppr:wp2005-012

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