Market Making by Price-Setting Firms

Spulber, Daniel F.

doi:10.2307/2297793

“…There are three types of agents: traders, who can be either buyers or sellers, and dealers. To be consistent with Spulber [1996] and Rust and Hall [2003], we will also sometimes refer to buyers as consumers and to sellers as producers. Buyers and sellers cannot trade directly an asset and all trades must be intermediated by dealers.…”

Section: A Model Of Dealers and Riskmentioning

confidence: 97%

“…The papers that are most related to ours are the equilibrium search models of Spulber [1996] and Rust and Hall [2003], which we extend by introducing inventory risk through the default of buyers. Duffie et al [2005] present an environment where market makers are able to trade their inventory imbalances with each other after each trading rounds.…”

Section: Related Literaturementioning

confidence: 99%

“…We base our analysis on a modified version of the equilibrium search models in Spulber [1996] and Rust and Hall [2003]. The presentation of the model follows closely the one in Rust and Hall [2003].…”

Section: A Model Of Dealers and Riskmentioning

confidence: 99%

“…Dealers must dispose of the surplus of assets. 9 The main difference from Spulber [1996] is that buyers do not give up on future options by trading in a given period. In Spulber [1996], buyers exit the market after they trade.…”

Section: A Model Of Dealers and Riskmentioning

confidence: 99%

“…9 The main difference from Spulber [1996] is that buyers do not give up on future options by trading in a given period. In Spulber [1996], buyers exit the market after they trade. Here, trading today does not exclude traders from future trading opportunities.…”

Section: A Model Of Dealers and Riskmentioning

confidence: 99%

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Market Making by Price-Setting Firms

Cited by 154 publications

References 12 publications

Dealers' Insurance, Market Structure, And Liquidity

Dealers' Insurance, Market Structure, And Liquidity

Price adjustment at multiproduct retailers

Price adjustment at multiproduct retailers

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