Simultaneous Multilateral Search

42 Pages Posted: 6 Jun 2019 Last revised: 1 Oct 2019

Date Written: May 17, 2019

Abstract

We study simultaneous multilateral search (SMS) in an over-the-counter market: when searching, an investor contacts several potential counterparties and then chooses to trade with the one offering the best quote. Search intensity (how frequently one can search) and search capacity (how many potential counterparties one can contact) affect equilibrium objects differently. Despite investor homogeneity, quote dispersion arises in equilibrium, with bids possibly crossing asks. We contrast SMS to bilateral bargaining (BB), where investors engage in Nash bargaining with one potential counterparty each time. Given the choice, investors might prefer BB over SMS, hurting allocative efficiency.

Keywords: request-for-quote, over-the-counter market, search, bargaining

JEL Classification: D4, G1

Suggested Citation

Glebkin, Sergei and Shen, Ji and Yueshen, Bart Zhou, Simultaneous Multilateral Search (May 17, 2019). Available at SSRN: https://ssrn.com/abstract=3389756 or http://dx.doi.org/10.2139/ssrn.3389756

Sergei Glebkin

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Ji Shen

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Bart Zhou Yueshen (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

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