Working paper No. 59
By Victoria Saporta
A common feature of dealeship markets is that dealers have a choice, when dealing with each other, between doing so directly and using an IDB. Using a three stage model we show that, for a dealer who has executed an undisclosed customer trade their choice depends on the number of arms who operate as dealers (market makers). Subject to a monotonicity constraint, a condition is derived determining which form of inter-dealer market will prevail.