One the biggest mysteries of economics is how an academic discipline could have come so long without solid models of one of its most fundamental pieces of study: markets. They are assumed to exist, without any formal typology nor empirical tests of their properties. So it’s refreshing to find this recent paper to try to tackle this challenge:
It introduces the central property of decentralization to a model of markets, and proceeds to proof that this very property makes them resilient to manipulation, enhancing welfare and liquidity. Just like in the real world.