Cooperation between independent market makers

  title={Cooperation between independent market makers},
  author={Bingyan Han},
  journal={Quantitative Finance},
  • Bingyan Han
  • Published 11 June 2022
  • Economics
  • Quantitative Finance
With the digitalization of the financial market, dealers are increasingly handling marketmaking activities by algorithms. Recent antitrust literature raises concerns on collusion caused by artificial intelligence. This paper studies the possibility of cooperation between market makers via independent Q-learning. Market making with inventory risk is formulated as a repeated general-sum game. Under a stag-hunt type payoff, we find that market makers can learn cooperative strategies without… 



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