Evolutionary choice of markets |
| |
Authors: | Anke Gerber Marc Oliver Bettzüge |
| |
Institution: | (1) Institute for Empirical Research in Economics, Blümlisalpstrasse 10, 8006 Zurich, Switzerland;(2) The Boston Consulting Group, Im Mediapark 8, 50670 Cologne, Germany |
| |
Abstract: | We consider an economy where a finite set of agents can trade on one of two asset markets. Due to endogenous participation
the markets may differ in the liquidity they provide. Traders have idiosyncratic preferences for the markets, e.g.due to differential
time preferences for maturity dates of futures contracts. For a broad range of parameters we find that no trade, trade on
both markets (individualization) as well as trade on one market only (standardization) is supported by a Nash equilibrium.
By contrast, whenever the number of traders becomes large, the evolutionary process selects a unique stochastically stable
state which corresponds to the equilibrium with two active markets and coincides with the welfare maximizing market structure.
We are grateful to Thorsten Hens, Fernando Vega-Redondo and a referee for valuable comments. We also thank seminar participants
at the University of Zurich, the CES research seminar at the University of Munich, the Koc University in Istanbul as well
as conference participants at the SAET conference in Ischia, the ESEM in Lausanne and the ESF workshop on Behavioural Models
in Economics and Finance in Vienna. A first version of the paper was written while Marc Oliver Bettzüge was visiting the Institute
for Empirical Research in Economics at the University of Zurich. Financial Support by the Swiss Banking Institute and by the
National Centre of Competence in Research “Financial Valuation and Risk Management” (NCCR FINRISK) is gratefully acknowledged.
The NCCR FINRISK is a research program supported by the Swiss National Science Foundation. |
| |
Keywords: | Endogenous participation Standardization Evolution Stochastic stability |
本文献已被 SpringerLink 等数据库收录! |
|