Exit,Survival, and Competitive Equilibrium in Dealer Markets |
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Authors: | Kee H. Chung Chairat Chuwonganant |
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Affiliation: | 1. State University of New York (SUNY) at Buffalo, Chung‐Ang University;2. Kansas State University |
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Abstract: | In this study we analyze dealer exit, survival, and competitive equilibrium in the NASDAQ Stock Market using data from a unique period that entails major changes in regulatory and competitive environments. We decompose the forces that affect dealer survival into market factors and dealer attributes. Market factors encompass those variables that affect the demand for and profitability of dealer services as a whole. Variation in survival probability across dealers results mainly from their competitive advantages in business strategies, information, quote aggressiveness, access to order flow, and economies of scale. On the whole, our results suggest that dealer markets exhibit a Darwinian survival of the fittest. |
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Keywords: | market structure dealer competition competitive advantages quote aggressiveness bid‐ask spread market share survival probability exit decision G14 G18 |
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