How Private Information Distorts OTC Market Outcomes

Lindsay Li and Nicholas Trachter

Richmond Fed Economic Brief, 2025, vol. 25, issue 26

Abstract: Information frictions in over-the-counter markets reduce asset creation, trading volume and overall welfare compared to complete information economies. Because investors can't easily gauge others' private valuations of assets, potentially efficient trades are lost. Private information skews ownership and trading patterns, favoring high-valuation investors and reducing the role of middlemen.

Keywords: economic; growth (search for similar items in EconPapers)
Date: 2025
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