Liquidity Risk in Sequential
نویسنده
چکیده
Liquidity Risk in Sequential Trading Networks, with Maciej Kotowski, Harvard University, and Matthew Leister, Monash University. Version: October 9, 2017. Forthcoming, Games and Economic Behavior. This paper studies a model of intermediated exchange with liquidityconstrained traders. Intermediaries are embedded in a trading network and their financial capacities are private information. We characterize our model's monotone, pure-strategy equilibrium. Agents earn positive intermediation rents in equilibrium. An experimental investigation supports the model's baseline predictions concerning agents' strategies, price dynamics, and the division of surplus. While private financial constraints inject uncertainty into the trading environment, our experiment suggests they are also a behavioral speed-bump, preventing traders from experiencing excessive losses due to overbidding Social Preferences of Future Physicians, with Jing Li, Cornell, and William Dow, UC Berkeley. Proceedings of the National Academy of Sciences, November 2017, 114(48) pp. 10291-10300.
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