Gavazza, Alessandro (2016) An empirical equilibrium model of a decentralized asset market. Econometrica, 84 (5). pp. 1755-1798. ISSN 0012-9682
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Abstract
I estimate a search-and-bargaining model of a decentralized market to quantify the effects of trading frictions on asset allocations, asset prices and welfare, and to quantify the effects of intermediaries that facilitate trade. Using business-aircraft data, I find that, relative to the Walrasian benchmark, 18.3 percent of the assets are misallocated; prices are 19.2-percent lower; and the aggregate welfare losses equal 23.9 percent. Dealers play an important role in reducing trading frictions: In a market with no dealers, a larger fraction of assets would be misallocated, and prices would be higher. However, dealers reduce aggregate welfare because their operations are costly, and they impose a negative externality by decreasing the number of agents’ direct transactions.
| Item Type: | Article |
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| Official URL: | http://onlinelibrary.wiley.com/ |
| Additional Information: | © 2016 The Wiley |
| Library of Congress subject classification: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor |
| Sets: | Departments > Economics |
| Date Deposited: | 26 Apr 2016 14:38 |
| URL: | http://eprints.lse.ac.uk/66234/ |
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