Markets versus negotiations: The predominance of centralized markets

Zvika Neeman*, Nir Vulkan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

7 Scopus citations


The paper considers the consequences of competition between two widely used exchange mechanisms, a "decentralized bargaining" market, and a "centralized" market. In every period, members of a large heterogenous group of privately-informed traders who each wish to buy or sell one unit of some homogenous good may opt for trading through one exchange mechanism. Traders may also postpone their trade to a future period. It is shown that trade outside the centralized market completely unravels. In every strong Nash equilibrium, all trade takes place in the centralized market. No trade ever occurs through direct negotiations.

Original languageEnglish
Article number6
JournalB.E. Journal of Theoretical Economics
Issue number1
StatePublished - 2010


FundersFunder number
National Science FoundationSBR-9806832
Engineering and Physical Sciences Research CouncilGR MO7052


    • Centralized markets
    • Competition
    • Decentralized bargaining
    • Decentralized markets
    • Market microstructure


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