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

Giuseppe Attanasi, Samuele Centorrino and Ivan Moscati

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2016, vol. 63, issue C, 22-35

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.

Keywords: Market experiments; Over-the-counter market; Double auction; Private vs. public information; Efficiency (search for similar items in EconPapers)
JEL-codes: C92 D41 D47 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Over-the-Counter Markets vs Double Auctions: A Comparative Experimental Study (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:63:y:2016:i:c:p:22-35

DOI: 10.1016/j.socec.2016.03.003

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