The design and analysis of an alternative web-based allocation mechanism for financial instrument trading and electricity trading
Abstract
The explosion of Internet-based commerce significantly changes the way
business is done and creates a huge demand for efficient market mechanism
design. The purpose of this study is to design online trading systems focusing on
economic characteristics. This study explores the development of an Internetbased
auction institution with a novel matching and execution mechanism. Our
research points to a more powerful intermediary model enabled by rapidly
developed computing systems, and aims to formulate a basic theoretic framework
for the design of future electronic markets. The new market mechanism is
analyzed from various perspectives: Pareto-optimality, allocation of trade surplus
in various market setting, market liquidity and the asymptotic incentive
compatibility of the proposed market mechanism are studied.
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The second part of my dissertation is to apply the model to different
electronic commerce settings. A new financial intermediation model is developed
to implement an electronic centralized exchange market to trade heterogeneous
options written on non-traded assets. This work contributes to the financial
intermediation theory by specifying how the intermediary would take advantage
of the new technology to achieve lower cost. This study also investigates the
application of the proposed new market model to the deregulated electricity
market redesign and reengineering, which can solve the inefficient dispatch and
congestion caused by the exposure risk when electricity and transmission are
traded in separate markets.
Department
Description
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