Intermediation in over-the-counter markets with price transparency

• 成果类型: Article
• 署名作者: Gabrovski, Miroslav; Kospentaris, Ioannis
• 署名单位: University of Hawaii System; University of Hawaii Manoa; Virginia Commonwealth University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2021.105364
• 发表日期: 2021
• 关键词: Over-the-counter markets; search frictions; intermediation; Price transparency; competitive search; sorting

摘要

A salient feature of over-the-counter (OTC) markets is intermediation: dealers buy from and sell to customers as well as other dealers. Traditionally, the search-theoretic literature of OTC markets has rationalized this as a consequence of random meetings and ex post bargaining between investors. We show that neither of these are necessary conditions for intermediation. We build a model of a fully decentralized OTC market in which search is directed and sellers post prices ex ante. Intermediation arises naturally as an equilibrium outcome for a broad class of matching functions commonly used in the literature. We further explore, both analytically and numerically, how the extent of intermediation depends on the nature of frictions and model primitives. Our numerical exercises also contrast the model's equilibrium implications to those of a benchmark model with random meetings and ex post bargaining. (c) 2021 Elsevier Inc. All rights reserved.