Competition between market making intermediaries
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Beschreibung
The present work deals with competition between market making intermediaries whose capacities are limited. Market making intermediaries set different prices for buyers and sellers and allow them better options for trade than they could otherwise expect from participating in a search market. In the unique subgame perfect equilibrium outcome of a dynamic game where intermediaires first choose capacities simultaneously before they set prices, each intermediary sets exactly the same capacity as it would set under Cournot conditions if capacity is costly. This result can be seen as a microfoundation of a Walrasian equilibrium if costs of capacity are small and the number of intermediaries is large.
Autor*in
Simon Lörtscher
Themen in »Competition between market making intermediaries«
capacity constraints intermediation market making market microstructure search markets