Simultaneous Multilateral Search
91 Pages Posted: 6 Jun 2019 Last revised: 6 Oct 2021
Date Written: October 5, 2021
This paper studies simultaneous multilateral search (SMS) in over-the-counter markets: When searching, a customer simultaneously contacts several dealers and trades with the one offering the best quote. Higher search intensity (how often one can search) improves welfare, but higher search capacity (how many dealers one can contact) might be harmful. When the market is in distress, customers might inefficiently favor bilateral bargaining (BB) over SMS. Such preference for BB speaks to the sluggish adoption of SMS trading, like request-for-quote protocols, in over-the-counter markets. Furthermore, a market-wide shift to SMS may not be socially optimal.
Keywords: request-for-quote, over-the-counter market, search, bargaining
JEL Classification: D4, G1
Suggested Citation: Suggested Citation