Bid-ask price competition with asymmetric information between market-makers

• 成果类型: Article
• 署名作者: Calcagno, Riccardo; Lovo, Stefano
• 署名单位: Vrije Universiteit Amsterdam
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1111/j.1467-937X.2006.378_1.x
• 发表日期: 2006
• 页码: 329-355
• 关键词: private information; exchange; microstructure; intervention; leadership; reputation; disclosure; liquidity

摘要

This paper studies the effect of asymmetric information on the price formation process in a quote-driven market. One market-maker receives private information on the value of the quoted asset and repeatedly competes with market-makers who are uninformed. We show that despite the fact that the informed market-maker's quotes are public, the market is never strong-form efficient with certainty until the last stage. We characterize a reputational equilibrium in which the informed market-maker influences and possibly misleads the uninformed market-makers' beliefs. At this equilibrium, a price leadership effect arises, the informed market-maker's expected pay-off is positive and the rate of price discovery increases in the last stages of trade.