Competition and Information Leakage

• 成果类型: Article
• 署名作者: Baldauf, Markus; Mollner, Joshua
• 署名单位: University of British Columbia; Northwestern University
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/727709
• 发表日期: 2024
• 页码: 1603-1641
• 关键词: FREQUENT BATCH AUCTIONS; MARKET; equilibrium; disclosure; CONTRACTS; search; DESIGN; price

摘要

When seeking to trade in over-the-counter markets, institutional investors typically restrict both the number of potential counterparties they contact and the information they disclose (e.g., by requesting two-sided rather than one-sided quotes). We rationalize these important facts in a model featuring endogenous front-running. Although an additional contact intensifies competition and aids in finding a natural counterparty, it also intensifies information leakage-which can be costly if it helps a losing dealer to front-run. We also address information design: the client optimally provides no information about her trading direction when requesting quotes. We conclude with implications for market design and regulation.