Department of Economics and Business - Universitat Pompeu Fabra

Title:: Centralized vs decentralized markets: The role of connectivity
Authors:: Simone Alfarano, Albert Banal-Estañol, Eva Camacho, Giulia Iori, Burcu Kapar and Rohit Rahi
Date:: January 2024
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
JEL codes:: C92, D82, G14
Area of Research:: Business Economics and Industrial Organization

Download the paper in PDF format (2,530 Kb)

Search Working Papers

By Author:
-enter one surname only or surname and first name separated by a comma and in this order-

By Date:
-when used a value in each of the four fields must be selected-
from (month) from (year) to (month) to (year)

By Keywords:
-separate each keyword or group of keywords by commas-

By JEL code(s):
-separate each code by commas-

By Area:

Predefined Queries