Over-the-Counter Markets vs. Double Auctions: A Comparative Experimental Study

Journal of Behavioral and Experimental Economics 63 (2016) 22–35

40 Pages Posted: 13 Jun 2016

See all articles by Giuseppe Attanasi

Giuseppe Attanasi

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG)

Samuele Centorrino

SUNY Stony Brook

Ivan Moscati

University of Insubria - Department of Economics; Bocconi University - Baffi Carefin Centre; London School of Economics & Political Science (LSE) - Centre for Philosophy of Natural and Social Science (CPNSS)

Date Written: March 30, 2016

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.

Keywords: Market experiments, Over-the-counter market, Double auction, Private vs. public information, Efficiency

JEL Classification: C92, D41, D47

Suggested Citation

Attanasi, Giuseppe and Centorrino, Samuele and Moscati, Ivan, Over-the-Counter Markets vs. Double Auctions: A Comparative Experimental Study (March 30, 2016). Journal of Behavioral and Experimental Economics 63 (2016) 22–35, Available at SSRN: https://ssrn.com/abstract=2793739

Giuseppe Attanasi (Contact Author)

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG) ( email )

250, rue Albert Einstein
Valbonne, 06560
France

Samuele Centorrino

SUNY Stony Brook ( email )

NY 11733-4384
United States

Ivan Moscati

University of Insubria - Department of Economics ( email )

Via Monte Generoso 71
Varese, 21100
Italy

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

London School of Economics & Political Science (LSE) - Centre for Philosophy of Natural and Social Science (CPNSS) ( email )

London
United Kingdom

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