Endogenous formation of security exchanges

Endogenous formation of security exchanges We use club theory for the first time to provide a model of securities exchange (SX) formation. We think of a SX as a local public good that allows its traders to diversify risk by trading their securities with other SX members. In our two-stage equilibrium setting, traders evaluate SXs depending on their risk-sharing possibilities and, given these evaluations, choose the SX they want to join. Security prices can differ among SXs and traders may value SX memberships differently. We establish continuity properties in both stages and show that equilibrium exists for a generic set of economies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economic Theory Springer Journals

Endogenous formation of security exchanges

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Publisher
Springer Berlin Heidelberg
Copyright
Copyright © 2016 by Springer-Verlag Berlin Heidelberg
Subject
Economics; Economic Theory/Quantitative Economics/Mathematical Methods; Game Theory, Economics, Social and Behav. Sciences; Microeconomics; Public Finance
ISSN
0938-2259
eISSN
1432-0479
D.O.I.
10.1007/s00199-016-0989-9
Publisher site
See Article on Publisher Site

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