COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1419

STRUCTURE, CLEARINGHOUSES AND SYMMETRY

Martin Shubik and Eric Smith

May 2003

We introduce and justify a taxonomy for the structure of markets and minimal institutions which appear in constructing minimally complex trading structures to perform the functions of price formation, settlement and payments. Each structure is presented as a playable strategic market game and is examined for its efficiency, the number of degrees of freedom and the symmetry properties of the structure.

Keywords: Strategic market games, Clearinghouses, Credit evaluation, Default

JEL Classification: C7, G10, G20, L10, D40, D50