Journal of Financial Economics Vol. 149 No. 3 2023
The limits of multi-dealer platforms
Abstract
On many important multi-dealer platforms, customers mostly request quotes from very few dealers. I build a model of multi-dealer platforms, where dealers strategically choose to respond to or ignore a request. If the customer contacts more dealers, each dealer responds with a lower probability and offers a stochastically worse price when responding. Dealers’ strategic avoidance of competition overturns the customer’s benefit from potentially receiving more quotes, worsening her best-overall price. In equilibrium, the customer contacts only two dealers. Multi-dealer platforms have limited ability to promote price competition: No design of information disclosure can improve the customer’s payoff above this outcome.
- DOI
- 10.1016/j.jfineco.2023.05.005
- Volume
- 149
- Issue
- 3
- Pages
- 434-450
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref