We study information percolation in a stylized over-the-counter market in which a large set of asymmetrically informed investors meet in small groups over time, exchanging information with their counterparties when matched, through for example their bids for an asset. We provide an explicit...

Rating agencies are often criticized for being biased in favor of borrowers, for being too slow to downgrade following credit quality deterioration, and for being oligopolists. Based on a model that takes into account the feedback effects of credit ratings, I show that: (i) a rating agency...

capital is imbalanced between the two markets.

their past trading volumes). Our results are consistent with the thrust of search-based OTC financial market theory.