Kalman J. Cohen, Risk Aversion and Information Structure: An Experimental Study of Price Variability in the Securities Markets: Discussion, The Journal of Finance, Vol. 40, No. 3, Papers and Proceedings of the Forty-Third Annual Meeting American Finance Association, Dallas, Texas, December 28-30, 1984 (Jul., 1985), pp. 845-846

The pros and cons of bank mergers and multiple-office banking are in the forefront of bank policy consideration today [8, p. 19] Commercial banks have Joined the industrial and merchandising files., as well as the transportation companies, to sweil a rising tide of merger; The Comptroller of the Currency has reported that nearly 2, 000 banks with resources of over $40 billion, were acquired by other banks between 1950 and 1962, inclusive, [47, p. ll].

Introduction, 112. — Theory construction (model building), 113. — General characteristics of computer models, 115. — Comparison of computer models with operations research simulations and econometric models, 117. — Methodological problems of computer models, 119. — Review of the literature, 121. — Future of computer models, 126.

By considering investor order placement strategy, this paper demonstrates that transaction costs cause bid-ask spreads to be an equilibrium property of asset markets. With transaction costs, the probability of a limit order executing does not go to unity as the order is placed infinitesimally close to a counterpart market quote; thus, with certainty of execution at the counterpart market quote, a "gravitational pull" is generated that keeps counterpart quotes from being placed infinitesimally close to each other. An equilibrium spread is defined and its size linked to market thinness; implications are noted for the design of a trading system.

Kalman J. Cohen, Steven F. Maier, Robert A. Schwartz, David K. Whitcomb, Market Makers and the Market Spread: A Review of Recent Literature, The Journal of Financial and Quantitative Analysis, Vol. 14, No. 4, Proceedings of 14th Annual Conference of the Western Finance Association, June 21-23, 1979 (Nov., 1979), pp. 813-814+816-835