Liquidity Constrained Markets Versus Debt Constrained Markets

Liquidity Constrained Markets versus Debt Constrained Markets

This paper compares two different models in a common environment. The first model has liquidity constraints in that consumers save a single asset that they cannot sell short. The second model has debt constraints in that consumers cannot borrow so much that they would want to default, but is otherwise a standard complete markets model. Both models share the features that individuals are unable ...

Constrained hierarchical networked optimization for energy markets

In this paper, we propose a distributed control strategy for the design of an energy market. The method relies on a hierarchical structure of aggregators for the coordination of prosumers (agents which can produce and consume energy). The hierarchy reflects the voltage level separations of the electrical grid and allows aggregating prosumers in pools, while taking into account the grid operatio...

Locational Market Power in Network Constrained Markets

This paper studies the issue of locational market power of suppliers in a market that is situated on a network. Locational market power arises when locational advantage allows suppliers to act non-competitively and raise prices above competitive levels. We propose a quantifiable definition of locational market power and analyze its properties over a general network. We also conduct a detailed a...

Banks, Markets and Liquidity

The banking sector is one of the most highly regulated sectors in the economy. However, in contrast to other regulated sectors there is no wide agreement on the market failures that justify regulation. We suggest that there are two important failures. The fi rst is a coordination problem that arises because of multiple equilibria. If people believe there is going to be a panic then that can be ...

Liquidity in Frictional Asset Markets