TY - JOUR
T1 - When it's not the only game in town
T2 - The effect of bilateral search on the quality of a dealer market
AU - Lamoureux, Christopher G.
AU - Schnitzlein, Charles R.
PY - 1997/6
Y1 - 1997/6
N2 - We report results from experimental asset markets with liquidity traders and an insider where we allow bilateral trade to take place, in addition to public trade with dealers. In the absence of the search alternative, dealer profits are large-unlike in models with risk-neutral, competitive dealers. However, when we allow traders to participate in the search market, dealer profits are close to zero. Dealers compete more aggressively with the alternative trading avenue than with each other. There is no evidence that price discovery is less efficient when the specialists are not the only game in town.
AB - We report results from experimental asset markets with liquidity traders and an insider where we allow bilateral trade to take place, in addition to public trade with dealers. In the absence of the search alternative, dealer profits are large-unlike in models with risk-neutral, competitive dealers. However, when we allow traders to participate in the search market, dealer profits are close to zero. Dealers compete more aggressively with the alternative trading avenue than with each other. There is no evidence that price discovery is less efficient when the specialists are not the only game in town.
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U2 - 10.1111/j.1540-6261.1997.tb04818.x
DO - 10.1111/j.1540-6261.1997.tb04818.x
M3 - Article
AN - SCOPUS:0041111351
SN - 0022-1082
VL - 52
SP - 683
EP - 712
JO - Journal of Finance
JF - Journal of Finance
IS - 2
ER -