The Federal Reserve's (Fed) monetary policy implementations often involve trades of huge amount in a short period of time, which dwarf any individual dealer's inventory capacity. Because of this, dealers strategically manage inventory, and charge uncompetitive pricing to the Fed, which is...

We develop a model of dealer-intermediated over-the-counter (OTC) markets in which customers choose their relationship dealers and dealers choose their levels of expertise, thereby determining the market structure and price informativeness jointly. We find that, in general, multiple equilibria...