This paper proposes a theory which explains why some assets are traded over the counter while others are traded in centralized exchanges. We develop a model in which the equilibrium market structure is driven by the differences in the trading needs of investors. In our model, trade takes place...

I analyze how the precision of information about the value of a bank's assets affects welfare and the economy's proneness to bank runs. In a model of banking with imperfect information, I find that more precise information need not be better: it may make an economy more fragile in the sense that...