We model a trader’s decision to supply liquidity by submitting limit orders or demand liquidity by submitting market orders in a limit order market. The best quotes and the execution probabilities and picking off risks of limit orders determine the price of immediacy. The price of immediacy...

This paper explains why a software manufacturer may permit limited piracy of its software. Piracy can be viewed as a form of price discrimination in which the manufacturer sells some of the software at a price of zero. In the presence of significant network externalities for the software, it may...

We present a method for identifying and estimating the gains from trade in limit order markets and provide new empirical evidence that the limit order market is a good market design. The gains from trade in our model arise because traders have different valuations for the stock. We use...

Theory predicts that funding conditions faced by financial intermediaries are an important limit to arbitrage. We identify and measure the value of funding liquidity from the cross-section of Treasury securities. To validate our interpretation, we establish linkages with funding conditions in...