Journal of Financial Intermediation Vol. 1 No. 1 1990
Liquidity without money: A General equilibrium model of market microstructure
Abstract
We consider a model in which the market period is divided into T rounds of trading, with the arrival of consumers determined exogenously. A monopolistic market maker sets the bid-price and the ask-price in each round, accepting all trades at the stated prices. Optimal prices remain constant when the aggregate supply and demand are known to the market maker, even if supplies and demands within individual rounds are not known. Examples illustrate the endogenous determination of inventory holding costs. The viability of a market-maker system is compared to an auction market with and without a “sophisticated” trader.
- DOI
- 10.1016/1042-9573(90)90009-5
- Volume
- 1
- Issue
- 1
- Pages
- 80-103
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref