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Working Paper

Search in Asset Markets: Market Structure, Liquidity, and Welfare

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This paper investigates how market structure affects efficiency and several dimensions of liquidity in an asset market. To this end, we generalize the search-theoretic model of financial intermediation of Darrell Duffie et al. (2005) to allow for entry of dealers and unrestricted asset holdings.
01.01.2007ISSN 2573-7953 WP 07-01DOI 10.26509/frbc-wp-200701
Keywords bid-ask spread, execution delay, liquidity, search, trade volume
JEL Classification Codes G11, G12, G21

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Lagos, Ricardo, and Guillaume Rocheteau. 2007. “Search in Asset Markets: Market Structure, Liquidity, and Welfare.” Federal Reserve Bank of Cleveland, Working Paper No. 07-01. https://doi.org/10.26509/frbc-wp-200701