Contrary to the prediction of the classic adverse selection theory, informed speculators receive better pricing relative to uninformed liquidity traders in over-the-counter financial markets. Dealers compete for information by chasing informed orders so as to better position their future price...

I analyze the interaction between buyers' information acquisition and market liquidity in over-the-counter markets with adverse selection. If a buyer anticipates that future buyers will acquire information about asset quality, she has an incentive to acquire information to avoid buying a lemon...

We analyze a canonical binary-action coordination game under the global games framework. To reduce coordination failure, we propose a novel intervention program that screens agents based on their heterogeneous interim beliefs. Compared with conventional government-guarantee type of programs, it...

We show that larger trades incur lower trading costs in government bond markets (“size discount”), but costs increase in trade size after controlling for clients’ identities (“size penalty”). The size discount is driven by the cross-client variation of larger traders obtaining better...

Contrary to the prediction of the classic adverse selection theory, a more informed trader could receive better pricing relative to a less informed trader in over‑the‑counter financial markets. Dealers chase informed orders to better position their future quotes and avoid winner’s curse in...

We show that larger trades incur lower trading costs in government bond markets ('size discount'), but costs increase in trade size after controlling for clients’ identities (‘size penalty’). The size discount is driven by the cross‑client variation of larger traders obtaining better...