{"paper":{"title":"Trading Frictions in Dynamic Cap-and-Trade Markets","license":"http://creativecommons.org/licenses/by/4.0/","headline":"","cross_cats":["q-fin.GN"],"primary_cat":"econ.TH","authors_text":"Aleh Tsyvinski, Nicola Borri, Xi Wu, Yukun Liu","submitted_at":"2026-06-02T15:21:49Z","abstract_excerpt":"We develop a dynamic stochastic model of markets with an externality and multiple trading frictions, and cap-and-trade as the leading application. Slow participation, limited intermediation, and heterogeneous information interact in equilibrium: agents choose costly market access, access determines residual compliance demand, intermediary constraints translate residual demand into a surrender-month premium, and the premium feeds back into access incentives. These interactions shape how effectively the market corrects the externality. We characterize access choices in closed form, prove that th"},"claims":{"count":0,"items":[],"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"source":{"id":"2606.03767","kind":"arxiv","version":1},"verdict":{"id":null,"model_set":{},"created_at":null,"strongest_claim":"","one_line_summary":"","pipeline_version":null,"weakest_assumption":"","pith_extraction_headline":""},"integrity":{"clean":true,"summary":{"advisory":0,"critical":0,"by_detector":{},"informational":0},"endpoint":"/pith/2606.03767/integrity.json","findings":[],"available":true,"detectors_run":[],"snapshot_sha256":"c28c3603d3b5d939e8dc4c7e95fa8dfce3d595e45f758748cecf8e644a296938"},"references":{"count":0,"sample":[],"resolved_work":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57","internal_anchors":0},"formal_canon":{"evidence_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"author_claims":{"count":0,"strong_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"builder_version":"pith-number-builder-2026-05-17-v1"}