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Liquid Markets: An Empirical Analysis of a Water Exchange

Yunmi Kong, Rice University
Friday, April 5, 2024
10:00-11:20 AM
201 Lorch Hall Map
This paper empirically analyzes the performance of one of the world’s most developed water exchanges, which operates as a primitive limit order market. Upon modeling participants’ choice of order price and order type, I identify their latent value distributions from observed orders and trades. The model flexibly allows for dynamics, risk aversion, and default behavior. Counterfactual simulations suggest the observed exchange attains substantially lower trade surplus than the benchmark of periodic uniform-price market clearing. Droughts exacerbate the gap in surplus per unit traded between the observed exchange and the benchmark. I assess the role of volume frictions, price shading, and temporal dispersion in explaining the gap.

This talk is presented by the Applied Microeconomics/Industrial Organization Seminar, sponsored by the Department of Economics with generous gifts given through the Jean Coven Speakers Fund in Economics and the Economics Strategic Fund.
Building: Lorch Hall
Event Type: Workshop / Seminar
Tags: Economics, Industrial Organization, Microeconomics, seminar
Source: Happening @ Michigan from Department of Economics, Applied Microeconomics/Industrial Organization, Department of Economics Seminars