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Instability of Centralized Markets
Author(s) -
Peivandi Ahmad,
Vohra Rakesh V.
Publication year - 2021
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta15579
Subject(s) - incentive , fragmentation (computing) , order (exchange) , business , industrial organization , market system , microeconomics , commerce , economics , finance , computer science , operating system
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.