Over-the-counter (OTC) markets attract substantial trading volume despite exhibiting frictions absent in centralized limit-order markets. We compare the efficiency of OTC and limit-order markets when traders' expertise is endogenous. We show that asymmetric access to counterparties in OTC...

We propose a parsimonious model of over-the-counter trading with asymmetric information to rationalize the existence of intermediation chains that stand between buyers and sellers of assets. Trading an asset through several heterogeneously informed intermediaries can preserve the efficiency of...

We show that firms intermediating trade have incentives to overinvest in financial expertise, and that these investments can be destabilizing. Financial expertise in our model improves firms' ability to accurately estimate value when trading a security. It creates adverse selection, which under...

We generalize and correct a model of bargaining with endogenous information acquisition proposed by Dang (2008). Allowing for asymmetric information costs, we show that the opportunity to obtain information during the bargaining process can lead to inefficient outcomes when the responder's cost...