TRADING AND INFORMATION DIFFUSION IN OVER-THE-COUNTER MARKETS

• 成果类型: Article
• 署名作者: Babus, Ana; Kondor, Peter
• 署名单位: Washington University (WUSTL); University of London; London School Economics & Political Science
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA12043
• 发表日期: 2018
• 页码: 1727-1769
• 关键词: NETWORKS; intermediation; COSTS

摘要

We propose a model of trade in over-the-counter (OTC) markets in which each dealer with private information can engage in bilateral transactions with other dealers, as determined by her links in a network. Each dealer's strategy is represented as a quantity-price schedule. We analyze the effect of trade decentralization and adverse selection on information diffusion, expected profits, trading costs, and welfare. Information diffusion through prices is not affected by dealers' strategic trading motives, and there is an informational externality that constrains the informativeness of prices. Trade decentralization can both increase or decrease welfare. A dealer's trading cost is driven by both her own and her counterparties' centrality. Central dealers tend to learn more, trade more at lower costs, and earn higher expected profit.