Instability of Centralized Markets
Ahmad Peivandi, Rakesh V. Vohra
Econometrica · 2021 · Volume 89 · Issue 1
Abstract
Centralized markets reduce search for buyers and sellers. Their “thickness” increases the chance of order execution at nearly competitive prices. In spite of the incentives to consolidate, some markets, securities markets and on-line advertising being the most notable, are fragmented into multiple trading venues. We argue that fragmentation is an inevitable feature of any centralized market except in special circumstances.
Keywords
Stability, core of incomplete information game, mechanism design
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