This paper studies whether two-stage trading mechanisms that involve inter-dealer trading after a customer-dealer trade improve welfare over the one-shot settings traditionally analyzed in the market microstructure literature.A main finding of the paper is that two-stage trading dominates...

We analyze the customer's choice with respect to a limit-order book, a dealership market, and a hybrid market structure. The customer's order is competed for and divided among risk averse market makers (limit-order providers) with heterogeneous inventories. Main conclusions of the paper are as...

Consistent with recent theoretical models where binding capital constraints lead to sudden liquidity dry-ups, we find that negative market returns decrease stock liquidity, especially for high volatility stocks and during times of tightness in the funding market. The asymmetric effect of changes...