Centralizing Disconnected Markets? An Irrelevance Result

Milena Wittwer

MPRA Paper from University Library of Munich, Germany

Abstract: This article compares centralized with disconnected markets in which n>2 strategic agents trade two perfectly divisible goods. In a multi-goods uniform-price double auction (centralized market) traders can make their demand for one good contingent on the price of the other good. Interlinking demands across goods is - by design - not possible when each good is traded in separate, single-good uniform-price double auctions (disconnected market). Here, agents are constrained in the way they can submit their joint preferences. I show for a class of models that equilibrium allocations and efficiency of centralized and disconnected markets nevertheless coincide when the total supply of the goods is known or perfectly correlated. This suggests that disconnected markets perform as well as centralized markets when the underlying uncertainty that governs the goods' market prices is perfectly correlated.

Keywords: Disconnected markets; divisible goods; multi-unit double auctions; trading (search for similar items in EconPapers)
JEL-codes: D44 D47 D82 G14 (search for similar items in EconPapers)
Date: 2017-02-01
New Economics Papers: this item is included in nep-mic
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https://mpra.ub.uni-muenchen.de/77640/1/MPRA_paper_77640.pdf revised version (application/pdf)

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