We study an electronic over-the-counter (OTC) market, in which each agent looks for the best counterpart through bilateral negotiations. We compare its performance with the standard electronic double-auction (DA) market, in which traders post their quotes publicly. We show that the lack of information in the OTC market induces an efficiency loss, characterized by an average closing price below the competitive price and by a traded quantity below the competitive quantity. We further test the robustness of these findings when exogenous shocks modify the competitive equilibrium. Among other things, we show that supply shocks increasing the competitive quantity improve OTC's efficiency.

Over-the-counter markets vs. double auctions: A comparative experimental study

MOSCATI, IVAN
2016-01-01

Abstract

We study an electronic over-the-counter (OTC) market, in which each agent looks for the best counterpart through bilateral negotiations. We compare its performance with the standard electronic double-auction (DA) market, in which traders post their quotes publicly. We show that the lack of information in the OTC market induces an efficiency loss, characterized by an average closing price below the competitive price and by a traded quantity below the competitive quantity. We further test the robustness of these findings when exogenous shocks modify the competitive equilibrium. Among other things, we show that supply shocks increasing the competitive quantity improve OTC's efficiency.
2016
http://www.journals.elsevier.com/journal-of-behavioral-and-experimental-economics/
Double auction; Efficiency; Market experiments; Over-the-counter market; Private vs. public information; Economics and Econometrics; Applied Psychology; Social Sciences (all)
Attanasi, Giuseppe; Centorrino, Samuele; Moscati, Ivan
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11383/2045343
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