Over-the-Counter Markets vs Double Auctions: A Comparative Experimental Study

Giuseppe Attanasi, Samuele Centorrino and Ivan Moscati ()

Department of Economics Working Papers from Stony Brook University, Department of Economics

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.

Date: 2014
New Economics Papers: this item is included in nep-exp and nep-reg
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Citations: View citations in EconPapers (3)

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Journal Article: Over-the-counter markets vs. double auctions: A comparative experimental study (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:nys:sunysb:14-06

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