Who Acquires Information in Dealer Markets?
Research output: Working paper › Research
We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. We then fully characterize the unique equilibrium as a function of the (uniform) cost of information, and the composition of the market in terms of liquidity traders and speculators. Lastly, we examine the implications of our analysis for market liquidity and price discovery. Our findings shed light on several empirical regularities.
Original language | English |
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Number of pages | 30 |
Publication status | Published - 2017 |
- Faculty of Social Sciences - Market Microstructure, Informed Market Makers, Dealer Markets, Information Acquisition, D82, D83, G12, G14, G20
Research areas
ID: 184807985