Rostek, Marzena;
Yoon, Ji Hee;
(2024)
Innovation in Decentralized Markets: Technology versus Synthetic Products.
American Economic Journal: Microeconomics
, 16
(1)
pp. 63-109.
10.1257/mic.20220138.
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Abstract
Advances in market-clearing technology for multiple assets and synthetic products present alternative ways to leverage complementarities and substitutabilites in asset payoffs. This paper compares their equilibrium and welfare effects. In competitive markets, either instrument can mimic the efficient design. When traders have price impact, however, synthetic products and market-clearing technology provide separate instruments for impacting markets’ performance and can generate synergies or trade-offs. Neither instrument can generally reproduce the other’s payoffs state by state. Moreover, innovation in market clearing renders additional synthetic products nonredundant. Our analysis points to the advantages of each type of innovation while also exposing potential risks. (JEL D44, D47, G11, G12, G13, O31)
| Type: | Article |
|---|---|
| Title: | Innovation in Decentralized Markets: Technology versus Synthetic Products |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1257/mic.20220138 |
| Publisher version: | http://dx.doi.org/10.1257/mic.20220138 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher's terms and conditions. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10187737 |
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