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2 posts on "market power"
April 21, 2025

The Origins of Market Power in DeFi

Pablo D. Azar, Adrian G. Casillas, and Maryam Farboodi

Photoillustration of blockchain in colors of blue.

In our previous Liberty Street Economics post, we introduced the decentralized finance (DeFi) intermediation chain and explained how various players have emerged as key intermediaries in the Ethereum ecosystem. In this post, we summarize the empirical results in our new Staff Report that explains how the need for transaction privacy across the DeFi intermediation chain gives rise to intermediaries’ market power.  

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Posted at 7:00 am in Cryptocurrencies, Financial Intermediation | Permalink | Comments (0)
November 10, 2021

How Does Market Power Affect Fire‑Sale Externalities?

Thomas Eisenbach and Gregory Phelan

An important role of capital and liquidity regulations for financial institutions is to counteract inefficiencies associated with “fire-sale externalities,” such as the tendency of institutions to lever up and hold illiquid assets to the extent that their collective actions increase financial vulnerabilities. However, theoretical models that study such externalities commonly assume perfect competition among financial institutions, in spite of high (and increasing) financial sector concentration. In this post, which is based on our forthcoming article, we consider instead how the effects of fire-sale externalities change when financial institutions have market power.

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Posted at 7:00 am in Bank Capital, Banks, Financial Institutions, Liquidity, Regulation | Permalink

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