Innovation in Decentralized Markets
29 Pages Posted: 14 Jul 2020
Date Written: June 19, 2020
This paper examines security design in imperfectly competitive markets in which assets clear separately rather than jointly. Derivatives are generally nonredundant even with zero asset supply. We characterize the scope for introducing nonredundant derivatives and examine the welfare effects of new assets. We compare welfare effects of derivatives vs. innovation in trading technology.
Keywords: Imperfect competition, Decentralized market, Uniform-price auction, Liquidity, Price impact, Efficiency, Derivatives, Security design
JEL Classification: D47, D53, G11, G12
Suggested Citation: Suggested Citation