Learn More
In this paper we develop a framework to study thin markets, in which all traders, buyers, and sellers are large, in the sense that they all have market power (also known as bilateral oligopoly). Unlike many IO models, our framework does not assume a priori that some traders have or do not have market power because " they are large or small. " Here, market(More)
This paper investigates the effects of market size on the ability of price to aggregate traders' private information. To account for heterogeneity in correlation of trader values, a Gaussian model of double auction is introduced that departs from the standard information structure based on a common (fundamental) shock. The paper shows that markets are(More)
Does encouraging trader participation enhance market competitiveness? This paper shows that, when trader preferences are interdependent, trader market power does not necessarily decrease with greater participation , and traders need not become price takers in large markets. Thus, larger markets can be less liquid and associated with lower ex ante welfare.(More)
Large institutional investors dominate many financial markets. This paper develops a consumption-based model of markets in which all institutional traders recognize their impact on prices. Bilateral (buyer and seller) market power changes efficiency and arbitrage properties of equilibrium. Predictions match temporary and permanent price effects of supply(More)
  • 1