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An Experimental Study of an Over-the-Counter Market

Author

Listed:
  • Giuseppe Attanasi

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Samuele Centorrino

    (SBU - Stony Brook University [SUNY] - SUNY - State University of New York)

  • Ivan Moscati

    (Uninsubria - Universitá degli Studi dell’Insubria = University of Insubria [Varese])

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.

Suggested Citation

  • Giuseppe Attanasi & Samuele Centorrino & Ivan Moscati, 2016. "An Experimental Study of an Over-the-Counter Market," Post-Print hal-01721851, HAL.
    • Handle: RePEc:hal:journl:hal-01721851
    DOI: 10.1016/j.socec.2016.03.003
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    Cited by:

    1. Attanasi, Giuseppe & Centorrino, Samuele & Moscati, Ivan, 2016. "Over-the-counter markets vs. double auctions: A comparative experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 63(C), pages 22-35.

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