IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v52y1997i1p245-76.html
   My bibliography  Save this article

Competition and Collusion in Dealer Markets

Author

Listed:
  • Dutta, Prajit K
  • Madhavan, Ananth

Abstract

This article develops a game-theoretic model to analyze marketmakers' intertemporal pricing strategies. The authors show that dealers who adopt noncooperative pricing strategies may set bid-ask spreads above competitive levels. This form of 'implicit collusion' differs from explicit collusion, where dealers cooperate to fix prices. Price discreetness or asymmetric information are not required for collusion to occur. Rather, institutional arrangements that restrict access to the order flow are important determinants of the ability to collude because they reduce dealers' incentives to compete on price. Public policy efforts to increase interdealer competition should focus on such restrictions. Copyright 1997 by American Finance Association.

Suggested Citation

  • Dutta, Prajit K & Madhavan, Ananth, 1997. "Competition and Collusion in Dealer Markets," Journal of Finance, American Finance Association, vol. 52(1), pages 245-276, March.
    • Handle: RePEc:bla:jfinan:v:52:y:1997:i:1:p:245-76
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-1082%28199703%2952%3A1%3C245%3ACACIDM%3E2.0.CO%3B2-Y&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:52:y:1997:i:1:p:245-76. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/afaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.